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Frontlines

Fortnightly Magazine - January 1 1997

happy with your electric rates, because you threatened the local electric utility with bypass or self generation, and then negotiated a long-term contract for discounted rates.

But suppose Congress comes through, passes legislation for customer choice, and rates then drop across the board (em even lower than in your prized long-term contract, which you signed when rates were still "regulated" to serve the public interest. Can you choose then to back out of your ill-advised contract?

Clearly, others have started thinking about this prospect, as shown by a couple of recent news items:

• A "Shut-up" Clause. A news release from International Paper Co. (IP), criticizing Entergy for restricting IP's right to intervene in future rate cases to challenge rates, since Entergy had already signed rate contracts with IP, and

• "Fresh Look" Rights. A decision from the Ohio Public Utilities Commission (PUC), guaranteeing that certain business customers who had signed contracts for discounted local telephone services (such as Centrex) would be allowed an open season (em a so-called "fresh look" (em to escape their contracts if it should turn out that local exchange rates fall even lower after the current deregulation imposed by the Telecommunications Act of 1996 and recent initiatives from the Federal Communications Commission (FCC) and the Ohio PUC.

IP's complaint asked the Arkansas Public Service Commission to void Entergy's attempt to require a "shut-up" clause from IP (forbidding intervention in rate proceedings) as a condition for extending current power supply contracts with IP's Pine Bluff and Camden mills. International Paper alleged that Entergy's "shut-up" clause violates public policy, and asked the Arkansas PSC to direct Entergy to resume "good-faith" negotiations on a new contract.

Meanwhile, the Ohio PUC has already taken action. In Case No. 95-845-TP-COI, In the Matter of the Commission Investigation Relative to the Establishment of Local Exchange Competition and Other Competitive Issues, decided November 7, the commission formerly approved a 180-day "fresh look" window of opportunity allowing telephone customers to review rates set under old contracts, and decide whether to choose to abandon the contracts and seek instead to obtain service from other service providers now deemed competitive. This "fresh-look" right would apply on a market-by-market basis (not according to territory) and would extend to those local telephone customers who have at least two years remaining on their

contracts, and whose contracts pertained to formerly regulated monopoly-type services that would be deregulated by new PUC policy.

Well, as you can imagine, this new ruling did not sit well with established carriers, such as ALLTEL, GTE, and Cincinnati Bell.

Those three companies had challenged the PUC, alleging that its fresh look rule was unconstitutional. No surprises there, of course. But the eye-opener came when the Ohio PUC took up the fight willingly and actually went so far as to declare that it could to review prior contracts between utility and customer and to declare them invalid. It justified that power as necessary to protect customers, and as granted by the state constitution as a "recognized exception" to the principle of sanctity of contracts, and ratified by the state