NYNEX Gets Price Cap

Fortnightly Magazine - July 15 1995
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The Massachusetts Department of Public Utilities (DPU) has completed a long-awaited rate plan for New England Telephone and Telegraph Co. (dba NYNEX), adopting price-cap regulation without earnings sharing, but with strong measures to protect ratepayers from monopoly pricing, investment risk, and subsidies of utility ventures. The plan also includes price floors and separates competitive and monopoly services for pricing purposes. The DPU also approved a rate freeze for basic residential service until 2001, but rejected a claim that rates should fall during that time. It refused to allocate productivity gains equally among all services, since that would frustrate moves toward cost-based pricing.

The DPU emphasized that price-cap regulation was not necessarily "deregulation," nor less restrictive than the traditional rate-of-return model. It approved the price-cap plan absent any particular required level of competition. Re New Eng. Tel. & Tel. Co. dba NYNEX, D.P.U. 94-50, May 12, 1995 (Mass.D.P.U.). t

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