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Alternative Regulation for Mass. Telecom Moves Forward

Fortnightly Magazine - June 15 1995

The Massachusetts Department of Public Utilities (DPU) has rejected challenges to an alternative price regulation plan proposed by NYNEX, a local exchange carrier (LEC). The New England Cable Television Association, Inc. had claimed that the DPU lacked authority to adopt a rate plan not tied directly to cost of service. According to NYNEX, the plan would allow price adjustments for all services except basic residential service, based on increases or decreases in inflation minus a productivity factor of 2.5 percent, plus or minus exogenous changes in operating costs.

The DPU acknowledged that, unlike some other states where price caps were in place, Massachusetts had no specific statutes designed to accommodate the new form of ratemaking. Nevertheless, it found no indication that the state's legislature or courts had intended to limit utility ratemaking to a specific regulatory scheme (em such as cost-of-service, rate-of-return ratemaking. The DPU cited alternative forms of regulation adopted under federal law as well as the adoption of price-cap plans in states with broad grants of regulatory authority like its own, such as New York, Rhode Island, and California. Re New England Telephone and Telegraph Co. d/b/a/ NYNEX, D.P.U. 94-50, Feb. 2, 1995 (Mass.D.P.U.).

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