Law & Lawyers

Now that incumbent LECs must offer all services for resale, state regulators must decide the appropriate level of discount for the new resale tariffs.

Discounts could put incumbent LECs at a disadvantage, since many local exchanges already price below the cost of service, particularly for basic residential access.

With competition looming, electric utilities increasingly resort to price discounts, both to retain customers and to alleviate some of the pressure to introduce retail competition. Performance-based ratemaking (PBR), which allows utilities greater flexibility in offering price discounts, is emerging as an integral component of many restructuring proposals.

However, flexible pricing can create inequity among ratepayers.

LEASING THE LOOP:

Telephone Service Resale in the Local ExchangeResellers want steep discounts, but local rates don't always cover costs. And reselling local lines provides little incentive

to upgrade the network.The Telecommunications Act of 1996 (Act) compels local exchange carriers (LECs) to sell telephone service to competitors (em who would then resell to the public at retail. Instead of constructing their own local distribution networks, competitors would buy local telephone service from the existing carrier at discounted rates.

The Georgia Public Service Commission (PSC) has adopted a set of policy guidelines to restructure and promote competition in local gas markets. The PSC said that a major problem is determining how smaller core customers can benefit: "Reliance on competitive market forces is preferable to regulation," but only when competition is effective and sustainable. To test for competition, the PSC will monitor: 1) the ability of providers to make functionally equivalent service readily available, and 2) the numbers and market strength of competitive providers.