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Michigan Approves LEC Rate Restructuring

Fortnightly Magazine - August 1996

The Michigan Public Service Commission (PSC) has authorized Ameritech Michigan, a local exchange carrier (LEC), to restructure its rates to comply with a new state law forbidding LECs to charge less than the total-service, long-run incremental cost for each local exchange service offered. The LEC claimed that it began with basic services because prices for that segment of the market had been set artificially low for customers in rural areas of the state. The new rate structure approved by the PUC replaces the LEC's seven current rate-group classifications with three new "rate access areas" based on customer density, as measured by access lines per square mile. While noting that the restructuring "might make basic residential service less affordable to some," the PUC ruled that the legislature had narrowly defined the scope of its review and that the new legislative provisions have precedence over general policy requirements, such as the duty to promote universal service. Re Ameritech Michigan, Case No. U-11039, May 10, 1996 (Mich.P.S.C.).

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