AN ACT Relating to the regulation of telecommunication companies; amending RCW 80.36.170, 80.36.180, 80.36.150, and 80.36.310; reenacting and amending RCW 80.04.130; and adding new sections to chapter 80.36 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. A new section is added to chapter 80.36 RCW to read as follows:

(1) The legislature declares that:

(a) Traditional rate of return, rate base regulation of local exchange companies may not in all cases provide sufficient regulatory options to permit the commission and the companies to respond most effectively to the rapid rate of technological and structural change now occurring in the telecommunications industry.

(b) Because of the great diversity in the scope and type of services provided by local exchange companies, alternative regulatory arrangements that meet the varying circumstances of different companies and their ratepayers may be desirable.

(2) The commission may regulate telecommunications companies subject to traditional rate of return, rate base regulation by authorizing an alternative form of regulation for a company or companies. The commission may determine the manner and extent of any alternative forms of regulation as may in the public interest be appropriate. In addition to the public policy goals declared in RCW 80.36.300, the commission shall consider in determining the appropriateness of any proposed alternative form of regulation, whether it will reduce regulatory delay and costs, encourage innovation in services and the prudent investment of capital, offer incentives for efficiency, facilitate the broad dissemination of technological improvements to appropriate classes of ratepayers, enhance the ability of a local exchange company to respond to competition and provide fair, just and reasonable rates for the company and for all ratepayers.

(3) A telecommunications company subject to traditional rate of return, rate base regulation may petition the commission to regulate the company pursuant to an alternative form of regulation. The company shall submit with its petition its plan for transition to an alternative form of regulation. The commission shall review and may modify by order the company's proposed plan. If the commission finds, after notice and hearing, that the plan or modified plan is in the public interest and will produce fair, just and reasonable rates for telecommunications services, it may approve the plan and authorize its implementation. The commission may initiate consideration of alternate forms of regulation for a company or companies on its own motion.

(4) Not later than sixty days from the entry of the commission's order, the company may file with the commission an election not to proceed with the alternative form of regulation as authorized by the commission.

(5) The commission may waive such regulatory requirements under this title for a telecommunications company subject to an alternative form of regulation as may be appropriate to facilitate the implementation of this section: PROVIDED, HOWEVER, That the commission may not waive any substantive legal requirements or grants of legal rights to any person contained in chapters 80.04 and 80.36 RCW, including the requirements of RCW 80.36.300 through 80.36.380, the regulatory flexibility act. The commission may waive different regulatory requirements for different companies or services if such different treatment is in the public interest.

NEW SECTION. Sec. 2. A new section is added to chapter 80.36 RCW to read as follows:

(1) The legislature declares that the availability of an alternative abbreviated formal procedure for use by the commission instead of a full adjudicative proceeding may in appropriate circumstances advance the public interest by reducing the time required by the commission for decision and the costs incurred by interested parties and ratepayers. Therefore the commission is authorized to use formal investigation and fact-finding instead of an adjudicative proceeding under chapter 34.05 RCW when it determines that its use is in the public interest.

(2) The commission may use formal investigation and fact-finding instead of the hearing otherwise provided for in the following circumstances:

(a) A complaint proceeding under RCW 80.04.110 with concurrence of the respondent when the commission is the complainant or with concurrence of the complainant and respondent when not the commission;

(b) A tariff suspension under RCW 80.04.130; or

(3) In formal investigation and fact-finding the commission may limit the record to written submissions by the parties and intervenors. The commission shall review the written submissions and, based thereon and on its expertise, shall enter appropriate findings of fact and conclusions of law and its order. The commission may hold public hearings for the receipt of information from members of the public that are not formal intervenors in the proceeding and may elect to convert the proceeding to an adjudicative proceeding at any stage.

(4) The commission shall adopt rules of practice and procedure including rules for written discovery of necessary information held by others for the use of formal investigation and fact-finding and for the filing of written submissions. The commission may provide by rule for a number of rounds of written comments: PROVIDED, That the party with the burden of proof shall always have the opportunity to file final reply comments.

Sec. 3. Section 80.36.170, chapter 14, Laws of 1961 as amended by section 31, chapter 450, Laws of 1985 and RCW 80.36.170 are each amended to read as follows:

No telecommunications company shall make or give any undue or unreasonable preference or advantage to any person, corporation or locality, or subject any particular person, corporation or locality to any undue or unreasonable prejudice or disadvantage ((~~in any respect whatsoever~~)) The commission shall have primary jurisdiction to determine whether any rate, regulation, or practice of a telecommunications company violates this section. This section shall not apply to telecommunications companies or services classified as competitive under RCW 80.36.320 or 80.36.330: PROVIDED, That this exclusion shall not limit the commission's authority to require state-wide, averaged toll rates to be made available by any telecommunications company subject to its jurisdiction.

Sec. 4. Section 80.36.180, chapter 14, Laws of 1961 as amended by section 32, chapter 450, Laws of 1985 and RCW 80.36.180 are each amended to read as follows:

No telecommunications company shall, directly or indirectly, or by any special rate, rebate, drawback or other device or method, unduly or unreasonably charge, demand, collect or receive from any person or corporation a greater or less compensation for any service rendered or to be rendered with respect to communication by telecommunications or in connection therewith, except as authorized in this title or Title 81 RCW than it charges, demands, collects or receives from any other person or corporation for doing a like and contemporaneous service with respect to communication by telecommunications under the same or substantially the same circumstances and conditions. The commission shall have primary jurisdiction to determine whether any rate, regulation, or practice of a telecommunications company violates this section. This section shall not apply to telecommunications companies or services classified as competitive under RCW 80.36.320 or 80.36.330.

Sec. 5. Section 80.36.150, chapter 14, Laws of 1961 as amended by section 29, chapter 450, Laws of 1985 and RCW 80.36.150 are each amended to read as follows:

(1) Every telecommunications company shall file with the commission, as and when required by it, a copy of any contract, agreement or arrangement in writing with any other telecommunications company, or with any other corporation, association or person relating in any way to the construction, maintenance or use of a telecommunications line or service by, or rates and charges over and upon, any such telecommunications line. The commission shall adopt rules that provide for the filing by telecommunications companies on the public record of the essential terms and conditions of every contract for service. The commission shall not require that customer proprietary information contained in contracts be disclosed on the public record.

(2) The commission need not treat contracts as tariffs for filing and approval purposes.

(3) The commission may waive or modify the requirements of RCW 80.36.320(2) and 80.36.330(2) with respect to the filing of price lists for contracts for services classified as competitive.

Sec. 6. Section 2, chapter 229, Laws of 1987 and by section 1, chapter 333, Laws of 1987 and RCW 80.04.130 are each reenacted and amended to read as follows:

(1) Whenever any public service company shall file with the commission any schedule, classification, rule or regulation, the effect of which is to change any rate, charge, rental or toll theretofore charged, the commission shall have power, either upon its own motion or upon complaint, upon notice, to enter upon a hearing concerning such proposed change and the reasonableness and justness thereof, and pending such hearing and the decision thereon the commission may suspend the operation of such rate, charge, rental or toll for a period not exceeding ten months from the time the same would otherwise go into effect, and after a full hearing the commission may make such order in reference thereto as would be provided in a hearing initiated after the same had become effective. The commission shall not suspend the effective date of a decrease in a rate, charge, rental, or toll filed by a telecommunications company pending investigation of the fairness, justness, and reasonableness of the decrease when the filing does not contain any offsetting increase to another rate, charge, rental, or toll and the filing company agrees to not file for an increase to any rate, charge, rental, or toll to recover the revenue deficit that results from the decrease for a period of one year. The filing company shall file with any decrease sufficient information as the commission by rule may require to demonstrate the decreased rate, charge, rental, or toll is above the long-run incremental cost of the service. A tariff decrease that results in a rate that is below long-run incremental cost, or is otherwise unlawful on its face, shall be rejected for filing and returned to the company. The commission may prescribe a different rate to be effective on the prospective date stated in its final order after its investigation, if it concludes based on the record that the originally filed and effective rate is unjust, unfair, or unreasonable.

The commission may suspend the initial tariff filing of any water company removed from and later subject to commission jurisdiction because of the number of customers or the average annual gross revenue per customer provisions of RCW 80.04.010. The commission may allow temporary rates during the suspension period. These rates shall not exceed the rates charged when the company was last regulated. Upon a showing of good cause by the company, the commission may establish a different level of temporary rates.

(2) At any hearing involving any change in any schedule, classification, rule or regulation the effect of which is to increase any rate, charge, rental or toll theretofore charged, the burden of proof to show that such increase is just and reasonable shall be upon the public service company.

(3) The implementation of mandatory local measured telecommunications service is a major policy change in available telecommunications service. The commission shall not accept for filing or approve, prior to June 1, 1990, a tariff filed by a telecommunications company which imposes mandatory local measured service on any customer or class of customers, except that, upon finding that it is in the public interest, the commission may accept for filing and approve a tariff that imposes mandatory measured service for a telecommunications company's extended area service or foreign exchange service. This subsection does not apply to land, air, or marine mobile service, or to pay telephone service, or to any service which has been traditionally offered on a measured service basis.

(4) The implementation of lifeline service is a major policy change in available telecommunications service. The implementation of lifeline service will aid in achieving the stated goal of universal telephone service.

Sec. 7. Section 3, chapter 450, Laws of 1985 and RCW 80.36.310 are each amended to read as follows:

Telecommunications companies may petition to be classified as competitive telecommunications companies under RCW 80.36.320 or to have services classified as competitive telecommunications services under RCW 80.36.330. The commission may initiate classification proceedings on its own motion. The commission may require all regulated telecommunications companies potentially affected by a classification proceeding to appear as parties for a determination of their classification. The commission shall enter its final order with respect to classification within ten months from the date of filing of a company's petition or the commission's motion.