The Vermont Public Service Board (PSB) has approved an alternative price regulation plan (PRP) for New England Telephone Co. (NET), while reducing its rates by 9.56 percent (about $15 million) per year, and ordering a $11.5-million rate refund. (Under state law, NET is not required to accept the price regulation plan. The local exchange carrier is bound, however, by the PSB's revenue requirement findings in the case.)
Between 1988 and 1993, NET was subject to innovative regulation that protected ratepayers from rapid rate increases while supporting increased competition and regulatory flexibility. The PRP is the next step, intended to create new incentives for NET to implement cost- and revenue-enhancing measures. It replaces traditional rate-of-return regulation with price regulation, including price caps, price floors, and price-adjustment formulas. Overall prices only may rise by no more than the rate of inflation minus 4 percent.
The PRP sets forth a detailed set of 24 service-quality standards, raising the current benchmark. Financial penalties are imposed for each month the standards are not met. Re New England Telephone and Telegraph Co., Docket Nos. 5700/5702, October 5, 1994 (Vt.P.S.B.).
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