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District of Columbia v. District of Columbia Public Service Commission

August 10, 2006

DISTRICT OF COLUMBIA, PETITIONER,
v.
DISTRICT OF COLUMBIA PUBLIC SERVICE COMMISSION, RESPONDENT, AND VERIZONWASHINGTON, DC INC., INTERVENOR.



On Petition for Review of a Decision of the District of Columbia Public Service Commission (Formal Case No. 1005, Order Nos. 13149 & 13258).

The opinion of the court was delivered by: Glickman, Associate Judge

Argued April 14, 2005

Before RUIZ and GLICKMAN, Associate Judges, and SCHWELB, Senior Judge.*fn1

The issue raised by the present petition for review is whether the District of Columbia Government is entitled to a refund or other retroactive relief from the tariff rate for emergency telephone services that Verizon Washington, DC Inc. ("Verizon") charged it from 2002 to 2004. Two years after Verizon began to charge the tariff rate pursuant to final authorization from the District of Columbia Public Service Commission ("PSC"), the PSC agreed in a new proceeding initiated by the District Government that the rate was unreasonable and needed to be reduced. However, although the PSC thus awarded the District prospective relief, it refused to relieve the District of its obligation to pay Verizon the full tariff rate for the period prior to its decision when the tariff was in force. We affirm the PSC's ruling, because such relief is prohibited by the so-called "filed rate doctrine" and its corollary, the rule against retroactive alteration of established rates.

I.

A. Regulatory Background

Since 1996, the PSC has approved a series of price cap plans*fn2 regulating the provision of telecommunications services in the District of Columbia by Verizon or its predecessors. Under the Telecommunications Competition Act of 1996, the PSC is authorized to approve a price cap plan after notice and a public hearing if it finds, inter alia, that "[t]he plan is in the public interest," "will produce fair, just, and reasonable rates for telecommunications services," and "does not unreasonably prejudice or disadvantage any customer class or provider of competitive services." D.C. Code § 34-2002 (j)(1), (3), (9) (2001).

For pricing purposes, Verizon's services have been grouped in the price cap plans into three categories or "baskets": basic,*fn3 competitive, and discretionary. As the PSC explains in one of the decisions now before us, basic services are "telecommunications services that are required to make and receive intrastate telephone calls or which are found to be essential by the Commission."*fn4 Competitive services are "those business services that can be obtained from providers other than Verizon."*fn5 Discretionary services are a catch-all category, encompassing services that are neither basic nor competitive. While price caps are imposed on basic and discretionary services, no caps are set for competitive services. The premise is that competitive forces in the marketplace will hold down the prices for the latter basket of services. "When a service is classified as competitive, the assumption is that market forces will operate to drive rates down, and thereby restrain the incumbent monopoly from engaging in price gouging." Order No. 13149 at 8.

Unlike other telecommunications services covered by Verizon's price cap plans, Emergency Number 911 ("E911") service has only one customer, the District of Columbia Government. Described by Verizon in its tariff as providing the general public with simple and direct telephone access to the District Government's "public safety answering points," E911 service was originally classified in Verizon's price cap plans as a basic service.

B. The 2002 Price Cap Plan

On August 16, 2001, Verizon and the Office of People's Counsel ("OPC")*fn6 petitioned the PSC to approve a settlement agreement relating to Verizon's proposed 2002 Price Cap Plan. Intended to replace a price cap plan that was due to expire at the end of the year, the proposed plan included three changes relevant to the present proceeding.*fn7 First, the plan limited annual rate increases for basic and discretionary services to 10% and 15%, respectively. Second, the plan reclassified E911 service from a basic to a competitive service, meaning that the service would no longer be subject to a price cap (or to any limits on rate increases).*fn8 Third, the plan provided that the parties would be allowed to return to the PSC to request the reclassification of any existing service from one basket to another.

After giving notice in the District of Columbia Register and requesting comments on the proposed plan,*fn9 the PSC held a public hearing on January 17, 2002. Although the District Government had been a party to the proceedings on Verizon's earlier price cap plans, it did not participate at the hearing on the 2002 plan, and it did not object to the proposed reclassification of E911 service or any other aspect of the plan.*fn10

During the public hearing, the PSC questioned the Verizon and OPC representatives about the E911 service. Both parties reiterated their support for moving that service from the basic basket to the competitive basket. Their rationale for the reclassification was twofold. First, Verizon anticipated competition from other telecommunications carriers, to whom Verizon was legally obligated to make available the E911 service components. Verizon's president testified that she was "well aware of one competitor in particular who is extremely interested in providing that service for the District Government,"*fn11 and that there were "certainly other companies capable of providing the service." The OPC representative agreed that E911 service was "fully competitive." Second, Verizon expected competition from the District Government itself, which had announced plans to displace Verizon by using its own data network ("DC-Net") and equipment to provide E911 services.

On February 28, 2002, the PSC approved the proposed 2002 Price Cap Plan with only slight modifications. The PSC determined, inter alia, that the Plan would "produce rates that are fair, just, reasonable, and nondiscriminatory" and would "not unreasonably prejudice or disadvantage any customer class or provider of competitive services." Order No. 12338 at 14, 15. As neither the District Government nor any other affected entity filed a ...


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