KRS 278.516: Alternative regulation process for small telephone utilities -- Findings

-- Definitions -- Procedures -- Withdrawal.

(1) The legislature finds and determines that:

(a) Small telephone utilities lack the resources to fully participate in the

existing regulatory processes, particularly under traditional rate of return

and certificate of public convenience and necessity regulation;

(b) Regulation, if not tailored specifically to the needs of small telephone

utilities, can retard the growth and development of small telephone utilities

by requiring the expenditure of excessive time and money responding to

and addressing regulatory processes instead of devoting those resources

to customer service and more productive business concerns and issues;

and

(c) It is in the public interest to provide regulatory flexibility to small telephone

utilities to better enable them to adjust to the competition and innovation

that has come and is coming to the telecommunications industry as found

and determined by the legislature at KRS 278.512(1).

(2) In addition to the definitions set forth at KRS 278.010, the following definitions

shall apply to this section:

(a) "Telephone utility" means a telephone utility as defined at KRS

278.010(3)(e) except that it includes local exchange carriers only;

(b) "Local exchange carrier" means a traditional wireline telephone utility

which provides its subscribers with access to the national public switched

telephone network;

(c) "Traditional wireline telephone utility" means one whose delivery of its

telephone utility services is characterized by the predominant use of wire

or wireline connections carrying communications transmissions between

the subscriber of the utility and the national public switched telephone

network;

(d) "Small telephone utility" means a local exchange carrier providing

telephone utility service and having not more than fifty thousand (50,000)

access lines in Kentucky;

(e) "Largest telephone utility" means the local exchange carrier providing

telephone utility service in Kentucky and having the greatest number of

access lines in Kentucky;

(f) "Access lines" mean the telephone lines provided by a local exchange

carrier. In calculating the number of access lines provided by a local

exchange carrier, the number of access lines provided by all telephone

utilities under common ownership or control, as defined in KRS

278.020(7), with that telephone utility shall be counted;

(g) "GDP" means the real Gross Domestic Product Price Index, as it may be

amended from time to time, as it is published by the Bureau of Economic

Analysis of the United States Department of Commerce;

(h) "Annual percent change in the GDP" means, for any given calendar year,

the annul percentage change in the GDP as it is calculated by the Bureau

of Economic Analysis of the United States Department of Commerce;

(i) "Basic business rate" and "basic residential rate" mean the total rates or

charges which must be paid by a business or residential subscriber,

respectively, to a local exchange carrier in order to receive, outside of a

standard metropolitan statistical area, telephone utility service within a

specified geographic area for local calling and for which tariffed rates or

charges are assessed, regardless of the amount of use of local calling;

(j) "Standard metropolitan statistical area" means any area in Kentucky

designated as such, or as a part thereof, pursuant to 44 U.S.C. sec.

3504(d)(3) and 31 U.S.C. sec. 1104(d), as they may be amended, by the

Office of Management and Budget of the Executive Office of the

President of the United States; provided, however, that for purposes of

this section, "standard metropolitan statistical area" shall include only the

two (2) largest, as measured by population, standard metropolitan

statistical areas, regardless of whether that area is located wholly or

partially in Kentucky;

(k) "Basic business service" or "basic residential service" means the service

for which basic business rates or basic residential rates are charged;

(l) "Average basic business or residential rate, including zone charges,"

means the total revenues which should be produced by the imposition of

those rates or charges divided by the number of access lines to which

those rates or charges are applicable;

(m) "Zone charges" mean mileage or zone charges and are the charges

assessed by a telephone utility on the basis of a subscriber's distance

from a central office in order that the subscriber may receive basic

business or residential services;

(n) "Subscriber" means the person or entity legally and financially

responsible for the bill rendered by a telephone utility for its services;

(o) "Intrastate access charges" mean the charges assessed for use of the

telecommunications facilities of one telephone utility by another person or

entity in order to deliver to the public for compensation telephone

messages originating and terminating within Kentucky;

(p) "Interstate access charges" mean the charges assessed for use of the

telecommunications facilities of one (1) telephone utility by another

person or entity in order to deliver to the public for compensation

telephone messages originating or terminating, but not both, in Kentucky;

and

(q) "Pic charges" are charges assessed by a local exchange carrier in order

to implement a change in a subscriber's long distance carrier.

(3) (a) If a small telephone utility elects to be regulated as provided in subsection

(7) of this section, a small telephone utility once during any twenty-four

(24) month period may adjust or implement each of the following rates or

charges: basic business rate; basic residential rate; zone charges; or

installation charges for basic business or basic residential services by an

amount not to exceed the sum of the annual percentage changes in the

GDP for the immediately preceding two (2) calendar years multiplied by

the existing rate or charge to be adjusted. However, in no event shall a

small telephone utility so adjust:

1. Its basic business rate, including zone charges, if the resulting

average basic business rate, including zone charges, would thereby

exceed the average basic business rate, including zone charges, of

the largest telephone utility;

2. Its basic residential rate, including zone charges, if the resulting

average basic residential rate would thereby exceed the average

basic residential rate including zone charges, of the largest

telephone utility; or

3. If its average basic business rate, including zone charges, its

average basic residential rate, including zone charges, or its

installation charges for basic business or basic residential services

would be increased by more than twenty percent (20%).

(b) At least sixty (60) calendar days before the effective date of such an

adjustment of its rates or charges, a small telephone utility shall file a

copy of its revised rates and tariffs with the commission and shall mail

notice of the proposed rate adjustment to each affected subscriber and

the commission. The notice shall state:

1. The GDP for the preceding two (2) calendar years;

2. The amount by which any of the small telephone utility's rates or

charges identified in subsection (3)(a) of this section will be

adjusted; and

3. The right of subscribers to object to the adjustment and request

commission review by filing a letter or petition with the commission.

(c) If by the forty-fifth calendar day following the date of the notice to

subscribers of such a proposed adjustment to its rates or charges, the

commission has received letters or petitions requesting commission

review of the adjustment signed by at least five hundred (500) subscribers

or five percent (5%) of subscribers, whichever is greater, the commission

shall immediately notify the small telephone utility of this fact, and the

proposed rate adjustment shall not become effective as scheduled. The

small telephone utility may withdraw the proposed rate or charge

adjustment, or if it decides to proceed, the commission shall review the

proposed rate adjustment as though no election had been made pursuant

to subsection (7) of this section.

(4) Any other provision of this chapter notwithstanding, a small telephone utility

which has elected to be regulated pursuant to this section may adjust any of its

rates, charges, or tariffs, except for:

(a) Its basic business rate;

(b) Its basic residential rate;

(c) Its zone charges;

(d) Its installation charges for basic business or basic residential services;

(e) Its access charges; or

(f) Its pic charges,

without regard to the effect on its revenues, by filing its proposed rates,

charges, or tariffs with the commission and by notifying its subscribers, both at

least thirty (30) calendar days prior to the effective date of its proposed rates,

charges, or tariffs.

(5) A small telephone utility which has elected to be regulated pursuant to this

section shall not:

(a) Adjust its intrastate access charges if the adjustment requires the small

telephone utility's access charge customers, including interexchange

carriers, to pay intrastate access charges at levels exceeding the small

telephone utility's interstate access charge levels; or

(b) Adjust its intrastate pic charges if the adjustment requires the small

telephone utility's customers to pay intrastate pic charges at levels

exceeding the small telephone utility's interstate pic charge levels.

The small telephone utility may decrease its intrastate access charges or

intrastate pic charges to any level without restriction. Adjustments to intrastate

access charge rates or intrastate pic charges shall be effective thirty (30)

calendar days following the filing of access charge tariffs or pic charge tariffs

with the commission.

(6) The rates, charges, earnings, or revenues of a small telephone utility which

has elected to be regulated pursuant to this section and is in compliance with

the provisions of this section shall be deemed by the commission to be in

compliance with KRS 278.030(1).

(7) A small telephone utility may elect, at any time, to be regulated by the

provisions, in their entirety only, of this section by filing a verified resolution of

the utility's board of directors, or other governing body, so electing with the

commission. An election shall be effective immediately upon filing with the

commission and shall remain effective until withdrawn by the filing with the

commission of a verified resolution of the small telephone utility's board of

directors or other governing body; provided, however, that all resolutions of

election or withdrawal shall remain in effect for at least one (1) year from the

date of their filing with the commission. A resolution electing to be regulated by

the provisions of this section shall mean that the small telephone utility so

electing shall be regulated by this section and shall not be regulated by KRS

278.020(1) and 278.300. Nothing in this section, however, shall be construed

to alter the applicability of KRS 278.020(5) or 278.030(2) to small telephone

utilities electing to be regulated by the provisions of this section.

(8) A small telephone utility which has elected to be regulated pursuant to this

section may file an application with the commission pursuant to KRS

278.020(1), and, if a utility does so, that application shall be deemed to have

been granted unless within thirty (30) calendar days following the filing of the

application, the commission denies the application. If the application is denied

or none is filed, the small telephone utility electing to be regulated pursuant to

this section may engage in the construction of the plant or facilities, or the

purchase of equipment or properties, to provide the services described in KRS

278.010(3)(e). However, if the small telephone utility subsequently files a

resolution of withdrawal under subsection (7) of this section, the increased

value of property that resulted from any construction project denied approval by

the commission or not submitted to the commission for approval may be

excluded from the small utility's rate base for rate making purposes if the cost

of construction exceeded one million dollars ($1,000,000) or five percent (5%)

of the value of the small telephone utility's property as reflected in the utility's

most recent annual report filed with the commission.