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Ohio Court Overturns Price-cap Plan

Fortnightly Magazine - May 15 1996

The Ohio Supreme Court has overturned an alternative regulation price-cap plan approved by the state public utilities commission (PUC) for Ameritech Ohio, a local exchange telephone carrier (LEC) formerly known as the Ohio Bell Telephone Co. The court also expressed "grave concern" that the PUC had accepted a partial settlement agreement in the case without the participation of the LEC's competitors. Under the circumstances, it was not clear, the court said, whether the approved plan "promotes competition as intended by the General assembly."

The court ruled that the PUC had exceeded its authority when it approved a request by the LEC to lower rates for basic service and to abandon traditional rate-of-return regulation in favor of a price-cap plan. It explained that state law allowed consideration of alternative rate plans, but only in the context of a comprehensive rate case in which the utility seeks a rate increase. (Under Ohio practice, a telephone utility may institute a rate decrease without a formal hearing.)

The court acknowledged that the legislature had broadened PUC authority to approve alternative regulation, but added that lawmakers had retained procedural rate case requirements so that regulators "could compare the proposed alternative rate plan with the information filed under a traditional rate formula to ensure that the new rate proposal was in the public interest." Time Warner AxS, et al. v. Ohio PUC, Nos. 95-587 to 95-589, - N.E.2d -, March 5, 1996 (Ohio).

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