Minnesota Session Laws - 1989, Regular Session

  

                         Laws of Minnesota 1989 

                        CHAPTER 74-H.F.No. 1056 
           An act relating to utilities; regulating 
          noncompetitive and competitive telephone services; 
          amending Minnesota Statutes 1988, sections 237.07; 
          237.081; 237.295, subdivisions 1 and 2; 237.57, 
          subdivision 1; 237.58, subdivision 1; 237.59, 
          subdivisions 1, 2, 3, and 6; 237.60, subdivisions 1 
          and 2; 237.62, subdivisions 1 and 2, and by adding a 
          subdivision; 237.63, subdivision 1, and by adding 
          subdivisions; and 237.64, subdivisions 1 and 2; Laws 
          1987, chapter 340, section 26; proposing coding for 
          new law in Minnesota Statutes, chapter 237; repealing 
          Minnesota Statutes 1988, sections 237.075, subdivision 
          1a; and 237.081, subdivision 3. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1988, section 237.07, is 
amended to read: 
    237.07 [SCHEDULE OF RATES FILED FILING REQUIREMENTS.] 
    Subdivision 1.  [FILING OF CHARGES.] It shall be the duty 
of Every telephone company to shall keep on file with the 
department a schedule of its exchange rates, tolls, and 
charges specific rate, toll, or charge for every kind 
of noncompetitive service and a price list for every kind of 
service subject to emerging competition, together with all rules 
and classifications used by it in the conduct of the telephone 
business, all of which shall be kept on file by the department 
subject to public inspection. including limitations on 
liability.  The filings are governed by chapter 13.  When a 
company sells services subject to emerging competition on an 
individually priced basis, it shall file a statement of the 
charges to its customers with the commission and the 
department.  The department shall require each telephone company 
to keep open for public inspection, at designated offices, so 
much of these schedules rates, price lists, and rules as it 
deems necessary for the public information.  
    Subd. 2.  [SEPARATE PRICING.] When competitive services or 
service elements or services on an individually priced basis are 
sold in conjunction with noncompetitive services or service 
elements, the telephone company shall file or have on file with 
the commission and the department separate prices for its 
services subject to emerging competition and noncompetitive 
services or service elements.  Telephone services or service 
elements must be offered on a nondiscriminatory basis. 
    Sec. 2.  [237.071] [SPECIAL PRICING.] 
    Except as prohibited by section 237.60, subdivision 3, 
prices unique to a particular customer or group of customers may 
be allowed for noncompetitive services and for services subject 
to emerging competition when differences in the cost of 
providing a service or a service element justifies a different 
price for a particular customer or group of customers. 
Individual pricing for services subject to emerging competition 
may be allowed when a uniform price should not be required 
because of market conditions.  Unique or individual prices for 
services or service elements in effect before the effective date 
of this section are deemed to have been approved under this 
section. 
    Sec. 3.  [237.076] [SETTLEMENTS; PROCEDURES.] 
    Subdivision 1.  [SETTLEMENTS.] In proceedings before the 
commission, interested parties are encouraged to enter into 
settlements of their disputes.  If a settlement is reached 
before a contested case hearing has been ordered and the 
commission rejects the settlement, the commission shall order a 
contested case hearing if a significant issue has not been 
resolved to the commission's satisfaction.  When a contested 
case hearing has been ordered under this chapter, the office of 
administrative hearings, before conducting the hearing, shall 
convene a settlement conference including all the parties to 
encourage settlement of issues in the contested case.  If a 
stipulated settlement is not reached before the contested case 
hearing, the office of administrative hearings may, at its 
discretion or a party's request, reconvene the settlement 
conference during the hearing or after its completion.  If all 
parties agree to a stipulated settlement of the case or a part 
of the case, the settlement must be submitted to the commission. 
    Subd. 2.  [PROCEDURES.] The commission may accept a 
settlement upon finding that to do so is in the public interest 
and is supported by substantial evidence.  If the commission 
does not accept a settlement, it may issue an order modifying 
the settlement, subject to the approval of the parties.  A party 
has ten days after entry of the order, or of an order disposing 
of a petition for reconsideration, in which to reject the 
proposed modification.  If no party rejects the proposed 
modification, the commission's order becomes final.  If the 
commission rejects a settlement or if a party rejects the 
commission's proposed modification of a settlement, the matter 
must be referred to the administrative law judge assigned to the 
case for further proceedings. 
    Sec. 4.  Minnesota Statutes 1988, section 237.081, is 
amended to read: 
    237.081 [SUMMARY INVESTIGATIONS OF INADEQUATE SERVICE.] 
    Subdivision 1.  [COMMISSION INVESTIGATIONS.] Whenever the 
commission shall believe believes that any a service is 
inadequate or cannot be obtained or that an investigation of any 
matter relating to any telephone service should for any reason 
be made, it may on its own motion summarily investigate the same 
service or matter with or without notice, except that the 
commission shall give notice to a telephone company before it 
investigates the level of rates charged by the company.  
    Subd. 1a.  [COMPLAINT INVESTIGATION.] Upon a complaint made 
against any cooperative telephone association, a telephone 
company, or a municipal telephone utility by any other provider 
of telephone service, by the governing body of any a political 
subdivision, or by no fewer than five percent or 100, whichever 
is the lesser number, of the subscribers or spouses of 
subscribers of the particular cooperative telephone association, 
telephone company, or municipal telephone utility, that any of 
the rates, tolls, tariffs, charges, or schedules, or any 
regulation, measurement, practice, act, or omission affecting or 
relating to the production, transmission, delivery, or 
furnishing of telephone service or any service in connection 
therewith with telephone service is in any respect unreasonable, 
insufficient, or unjustly discriminatory, or that any service is 
inadequate or cannot be obtained, the commission shall proceed 
to make an investigation.  If the commission finds that all 
significant issues raised have not been resolved to its 
satisfaction, it shall order a hearing., after notice to the 
telephone company, shall investigate the matters raised by the 
complaint. 
    Subd. 2.  [PROCEEDINGS AFTER INVESTIGATIONS.] (a) If, after 
making such summary an investigation under subdivision 1 or 1a, 
the commission becomes satisfied that sufficient grounds exist 
to warrant a formal hearing being ordered as to the matters 
investigated, it shall set a time and place for a hearing.  
finds that a significant factual issue raised has not been 
resolved to its satisfaction, the commission shall follow the 
appropriate procedure prescribed by this subdivision. 
    (b) For an investigation concerning the reasonableness of 
the rates for noncompetitive services of a telephone company 
whose general revenue requirement is determined under section 
237.075, the commission shall order the company to initiate a 
rate proceeding in accordance with section 237.075.  The 
commission shall allow the company at least 120 days after the 
date of the commission's order to initiate the proceeding.  
    (c) For other investigations, the commission shall order 
that a contested case hearing be conducted under chapter 14 
unless the complainant, the telephone company, and the 
commission agree that an expedited hearing under section 237.61 
is appropriate.  
    Subd. 3.  Notice of the time and place for such hearing 
shall be made to all interested parties by postage paid, first 
class mail.  
    Subd. 4.  [ESTABLISHMENT OF RATES AND PRICES.] Whenever the 
commission shall find finds, after a proceeding under 
subdivision 2, that any (1) a service which that can be 
reasonably demanded cannot be obtained, or (2) that any of the 
rates, tolls, tariffs, charges or schedules rate, toll, tariff, 
charge, or schedule, or any regulation, measurement, practice, 
act, or omission affecting or relating to the production, 
transmission, delivery, or furnishing of telephone service or 
any service in connection therewith with telephone service, is 
in any respect unreasonable, insufficient, or unjustly 
discriminatory, or (3) that any service is inadequate, the 
commission shall make an order respecting the rates, tolls, 
tariffs tariff, regulation, act, omission, practice, or service 
that is just and reasonable and, if applicable, shall establish 
just and reasonable rates and prices. 
    Subd. 5.  [SERVICE; NOTICE.] A copy of such an order shall 
issued under this section must be served upon the person against 
whom it runs or the person's attorney, and notice thereof 
shall of the order must be given to the other parties to the 
proceedings or their attorneys.  
    Sec. 5.  Minnesota Statutes 1988, section 237.295, 
subdivision 1, is amended to read: 
    Subdivision 1.  [PAYMENT FOR INVESTIGATIONS.] Whenever the 
department or commission, in a proceeding upon its own motion, 
on complaint, or upon an application to it, shall deem considers 
it necessary, in order to carry out the duties imposed on it, to 
investigate the books, accounts, practices, and activities of, 
or make appraisals of the property of any, a telephone company, 
or to render any engineering or accounting services to any a 
telephone company, the telephone company shall pay the expenses 
reasonably attributable to the investigation, appraisal, or 
service.  The department and commission shall ascertain the 
expenses, and the department shall render a bill therefor for 
those expenses to the telephone company, either at the 
conclusion of the investigation, appraisal, or services, or from 
time to time during its progress, which.  The bill shall 
constitute constitutes notice of the assessment and a demand for 
payment.  The amount of the bills so assessed by the department 
shall under this subdivision must be paid by the telephone 
company into the state treasury within 30 days from the date of 
assessment.  The total amount, in any one a calendar year, for 
which any a telephone company shall may become liable, by reason 
of costs incurred by the department and commission within that 
calendar year, shall may not exceed two-fifths of one percent of 
the gross jurisdictional operating revenue of the telephone 
company in the last preceding calendar year.  Direct charges may 
be assessed without regard to this limitation until the gross 
jurisdictional operating revenue of the telephone company for 
the preceding calendar year has been reported for the first 
time.  Where, pursuant to under this subdivision, costs are 
incurred within any a calendar year which that are in excess of 
two-fifths of one percent of the gross jurisdictional operating 
revenues, the excess costs shall are not be chargeable as part 
of the remainder under subdivision 2, but shall must be paid out 
of the general appropriation of the department. 
    Sec. 6.  Minnesota Statutes 1988, section 237.295, 
subdivision 2, is amended to read: 
    Subd. 2.  [ASSESSMENT OF COSTS.] The department and 
commission shall quarterly, at least 30 days before the start of 
each quarter, estimate the total of its their expenditures in 
the performance of its their duties relating to telephone 
companies, other than amounts chargeable to telephone companies 
under subdivision 1 or 5.  The remainder shall must be assessed 
by the department to the several telephone companies operating 
in this state in proportion to their respective gross 
jurisdictional operating revenues during the last calendar 
year.  The assessment shall must be paid into the state treasury 
within 30 days after the bill has been mailed to the several 
telephone companies, which shall constitute.  The bill 
constitutes notice of the assessment and demand of 
payment thereof.  The total amount which that may be assessed to 
the telephone companies, under authority of this subdivision, 
shall may not exceed one-eighth of one percent of the total 
gross jurisdictional operating revenues during the calendar 
year.  The assessment for the second quarter of each fiscal year 
shall must be adjusted to compensate for the amount by which 
actual expenditures by the commission and department for the 
preceding fiscal year were more or less than the estimated 
expenditures previously assessed.  A telephone company with 
gross jurisdictional operating revenues of less than $5,000 is 
exempt from assessments under this subdivision. 
    Sec. 7.  Minnesota Statutes 1988, section 237.57, 
subdivision 1, is amended to read: 
    Subdivision 1.  [SCOPE.] The terms used in sections 237.57 
to 237.68 this chapter have the meanings given them in this 
section.  
    Sec. 8.  Minnesota Statutes 1988, section 237.58, 
subdivision 1, is amended to read: 
    Subdivision 1.  [APPLICABILITY.] This section and sections 
237.59,; 237.60, and subdivisions 1, 2, and 5; 237.62; and 
section 18 do not apply to a telephone company unless the 
company notifies the commission in writing of its decision to be 
subject to all of those sections.  The company may not revoke 
its decision to be subject to those sections before January 1, 
1994. 
    Sec. 9.  Minnesota Statutes 1988, section 237.59, 
subdivision 1, is amended to read: 
     Subdivision 1.  [EMERGING COMPETITIVE SERVICES.] The 
following services provided by the telephone company are subject 
to emerging competition unless and until reclassified as 
noncompetitive or subject to effective competition under this 
section: 
     (1) apartment door answering services; 
     (2) automatic call distribution; 
     (3) billing and collection services; 
     (4) call waiting, call forwarding, and three-way calling 
services for businesses with three or more lines; 
     (5) central office-based pricing packages providing 
switched business access lines which substitute for private 
branch exchange systems which may or may not share intelligence 
with customer premises equipment; 
     (6) command link-type services for network reconfiguring to 
rearrange cross-connections between channel services; 
     (7) custom network services and special assemblies; 
     (8) digicom switchnet services for full duplex, 
synchronous, information transport; 
     (9) direct customer access services for telephone number 
information services video display; 
     (10) group access bridge services; 
     (11) inter-LATA and intra-LATA message toll service; 
     (12) inter-LATA and intra-LATA private line services; 
     (13) inter-LATA and intra-LATA wide area telephone service; 
    (14) mobile radio services; 
    (15) operator-handled intercept services; 
    (16) public pay telephone services, excluding charges for 
access to the central office; 
    (17) seminars; 
    (18) services not previously offered prior to August 1, 
1987; 
    (19) services which generate a service that generates an 
annual revenue equal to or less than the greater of one-tenth of 
one percent or $100,000 of a telephone company's annual gross 
revenues in the year the company elects to be covered by this 
section; 
    (20) special construction of facilities; 
    (21) studies; 
    (22) systems for automatic dialing; and 
    (23) versanet-type service access line involving continuous 
monitoring and transmission of data from customer's premises to 
the central office.  
    Sec. 10.  Minnesota Statutes 1988, section 237.59, 
subdivision 2, is amended to read: 
    Subd. 2.  [PETITION.] A person telephone company, or the 
commission on its own motion, may petition to have a service 
of a that telephone company classified as subject to effective 
competition or emerging competition.  The petition must be 
served on the commission, the department of public service, the 
office of the attorney general, and any other person designated 
by the commission.  The petition must contain at least: 
    (1) a list of the known alternative providers of the 
service available to the company's customers; 
    (2) an estimate of the company's current market share; 
    (3) identification of barriers to entry or exit from the 
market for the service; and 
    (4) a description of affiliate relationships with any other 
provider of the service in the company's market. 
    Sec. 11.  Minnesota Statutes 1988, section 237.59, 
subdivision 3, is amended to read: 
    Subd. 3.  [EXPEDITED PROCEEDING.] A person who files 
telephone company that is the subject of a petition under 
subdivision 2 may request that the commission determine the 
classification of the service through an expedited proceeding 
under section 237.61 or a contested case hearing.  If an 
expedited proceeding is requested, the commission must provide 
interested persons an opportunity to comment on the 
appropriateness of the process and the merits of the petition. 
    When an expedited proceeding is requested, the commission 
must shall make a final determination within 60 days of the date 
on which all required information required pursuant to under 
subdivision 2 is filed, unless during the 60 days the commission 
finds that a material issue of fact is in dispute, in which case 
it must shall order that a contested case hearing be conducted 
to evaluate the petition. 
    Sec. 12.  Minnesota Statutes 1988, section 237.59, 
subdivision 6, is amended to read: 
    Subd. 6.  [BURDEN OF PROOF.] The person that files the 
petition under subdivision 2 has the burden of proving that 
competition exists and that classifying the classification of a 
service as other than noncompetitive will serve the public 
interest. may not be changed so as to result in lessened 
regulation unless it is demonstrated by a preponderance of the 
evidence that the criteria of subdivision 5 have been met.  
    Sec. 13.  Minnesota Statutes 1988, section 237.60, 
subdivision 1, is amended to read: 
    Subdivision 1.  [EFFECTIVE COMPETITION.] A company whose 
service has been determined by the commission to be subject to 
effective competition may:  
    (1) decrease the rate for that service effective without 
notice to its customers or the commission,; and may 
    (2) increase the rate for that service effective upon 
notice to its customers at least 30 days in advance of the 
increase.  
     A company whose service is declared subject to effective 
competition is not subject to the requirements of section 
237.07, subdivision 1, for that service.  
    Sec. 14.  Minnesota Statutes 1988, section 237.60, 
subdivision 2, is amended to read: 
    Subd. 2.  [EMERGING COMPETITION.] (a) A telephone company 
whose service has been determined to be subject to emerging 
competition must file a price list with the commission and the 
department.  The price list must contain the rates, tolls, and 
charges for the service together with the rules, regulations, 
and classifications used in providing that service.  This 
chapter does not prohibit a telephone company from including 
limitations on liability as terms or conditions in the price 
lists.  
    (b) A company may decrease the rate for a service subject 
to emerging competition that is listed in the price list, 
effective ten days after filing a new price list with the 
commission. and the department, along with an incremental cost 
study demonstrating that the proposed price is above incremental 
cost.  The commission shall prevent a proposed price reduction 
from going into effect if, after receiving a complaint or on its 
own motion, under section 237.081, the commission finds that the 
proposed rate is below incremental cost or that the proposed 
rate is not just and reasonable. 
     (b) A company may increase the rate for a service subject 
to emerging competition that is listed in the price list 
effective 30 days after notice is given to affected customers, 
the commission, and the department.  The notice and new price 
list filing to the commission and the department for a rate 
increase must include an incremental, or other acceptable cost 
study as determined by the commission, supporting the 
increase demonstrating that the proposed price is above 
incremental cost.  The department shall investigate an 
increase or decrease in rates for services subject to emerging 
competition, and report its findings to the commission within 30 
days of the filing.  The commission may, within 60 days after 
the date of the filing, order that the rate increase is interim 
in nature and subject to refund.  If interim rates are not 
ordered, the rate increase is not refundable.  If a rate is 
subject to refund, the commission, after a contested case 
hearing or an expedited hearing under section 237.61 if there 
are no material facts in dispute, order the company to adjust 
its rates or charges for a service subject to emerging 
competition if the commission finds that the price charged is 
excessive.  The commission may, must make a final decision 
regarding the propriety of the rate increase within ten months 
of the date a the price change went into effect, order was 
filed.  If the commission does not do so, the price adjustments 
retroactive to the date the change went into effect and order 
the company to make any necessary refunds to affected 
customers is deemed approved. 
    (c) If language describing a rate, term, or condition of 
service in a price list is changed without substantially 
altering the application of the price list, the change may take 
effect upon one-day notice to the commission. 
    (d) If a term or condition of service in a price list is 
changed in a way that results in a substantial change in the 
application of the price list, but the price is not changed, the 
change in the price list is effective at the same time as a 
price decrease under paragraph (a). 
    (e) If a new pricing plan is proposed for a service that is 
currently offered by a telephone company, the change in the 
price list is subject to the same schedules governing a price 
increase under paragraph (b).  For purposes of this paragraph, a 
new pricing plan is a proposal that bundles rate elements for a 
service, alters the definition of the rate elements for a 
service, or includes increases for some rate elements and 
decreases for other rate elements. 
    (f) A telephone company may offer a new service to its 
customers ten days after it files a price list and incremental 
cost study for the service with the department and the 
commission. 
    (g) A change in a price list not covered by paragraphs (a) 
to (f) must be reviewed according to the schedule prescribed for 
a price increase under paragraph (b). 
    (h) An incremental cost study required by this section and 
section 237.62 must be a long-run incremental cost study unless 
the commission has allowed the telephone company required to do 
the study to set rates based on a variable cost study.  A 
telephone company may include a petition to file a variable cost 
study instead of a long-run incremental cost study with its 
notice of price change or its filing of a new service.  The 
commission shall grant the petition if the company demonstrates 
that a long-run incremental cost study is burdensome in relation 
to its annual revenue from the service involved, that the 
company has a low market share, that the service is no longer 
being offered to new customers, or if the company shows other 
good cause.  A petition must be accompanied by a variable cost 
study.  If the petition is denied, the company shall withdraw a 
filing made under this section. 
     (i) For purposes of this section and section 237.62, (1) 
long-run incremental cost means the change in total cost 
associated with a change in volume of the service, expressed on 
a per-unit basis, and (2) variable cost means the change in 
total cost, excluding fixed costs, associated with a change in 
volume of service, expressed on a per-unit basis. 
    Sec. 15.  Minnesota Statutes 1988, section 237.62, 
subdivision 1, is amended to read: 
    Subdivision 1.  [FINANCIAL REQUIREMENTS.] Paragraph (a) or 
(b) This subdivision governs a proceeding initiated under 
section 237.075 or 237.081 to change the rates for 
noncompetitive services.  Subdivision 1a governs a proceeding 
under section 237.075 or 237.081 to change the rates for 
noncompetitive services and for services subject to emerging 
competition.  The company shall elect that rate changes be made 
in accordance with either paragraph (a) or (b) this subdivision 
or subdivision 1a, and that election is binding on the 
commission in all respects.  
    (a) The A company electing to use this subdivision may 
demonstrate the revenue requirement for its noncompetitive 
services by providing: 
    (1) revenues, expenses, and embedded investments directly 
related to the provision of the noncompetitive services; 
    (2) a reasonable portion of the net income generated 
jointly or arising from jointly competitive and noncompetitive 
services, and net income received by a telephone company as a 
result of the sale of telephone number listings, charges and 
advertising for use in white pages, yellow pages, other 
directory and other related services, must be treated as arising 
jointly from competitive and noncompetitive services; and 
    (3) a reasonable portion of the company's total joint and 
common costs to be attributable to the provision of the 
noncompetitive services. 
    (b) Alternatively, the company may demonstrate the revenue 
requirement for its noncompetitive services by providing: 
    (1) revenues, expenses, and embedded investments related to 
all of its services; and 
    (2) to the extent that the company's embedded costs for 
competitive services, and a reasonable portion of the joint and 
common costs attributable to the competitive services, exceed 
the revenues produced by those competitive services, the 
difference must be added to the company's total revenues.  
    For purposes of this subdivision, when a telephone company 
uses an investment to provide competitive services to end-user 
customers and another company provides a competing service that 
requires, in part, the use of a similar investment to provide 
the telephone company's noncompetitive services or service 
elements, the telephone company shall treat both investments and 
related costs as though they are providing noncompetitive 
services and shall attribute revenues to the noncompetitive 
category using the rates for the noncompetitive service or 
service elements multiplied by the appropriate current volumes 
for the telephone company's competitive service instead of 
determining the investment, associated expenses, and common and 
joint costs under clauses (1) and (3) to determine the revenue 
requirement for the noncompetitive category. 
    Sec. 16.  Minnesota Statutes 1988, section 237.62, is 
amended by adding a subdivision to read: 
    Subd. 1a.  [ALTERNATIVE METHOD.] (a) A telephone company 
electing to use this subdivision shall demonstrate the combined 
revenue requirement for its noncompetitive services and services 
subject to emerging competition in accordance with paragraphs 
(b) to (d). 
    (b) The telephone company shall use the procedures 
prescribed by subdivision 1 to allocate and remove the cost of 
providing services that are subject to effective competition, 
except that those procedures do not apply to central 
office-based dial switching systems that, by January 1, 1984, 
have been approved by the commission as obsolete and that are 
not available to new customers. 
    (c) Except as provided in paragraph (d), a combined revenue 
requirement for noncompetitive services and services subject to 
emerging competition must be determined under section 237.075.  
Once the revenue requirement has been established, the 
commission shall determine the telephone company's rates for 
services subject to emerging competition and noncompetitive 
services so that the revenue requirement can be met.  The 
telephone company shall provide an embedded direct cost and an 
incremental cost study for each service subject to emerging 
competition that generates annual revenues in excess of the 
greater of one-tenth of one percent or $100,000 of the company's 
annual gross revenues for the test-year period.  An embedded 
direct cost is the sum of current expenses and a return of and a 
return on the current net book investment directly incurred to 
provide a service. 
    (d) On the date that a telephone company becomes subject to 
this section under section 237.58, the company shall begin an 
accounting of rate changes for services generally offered before 
January 1, 1988, that are subject to emerging competition.  If 
the net effect of those rate changes is a lower revenue amount 
than would have been realized had the rates remained unchanged, 
the combined revenue requirement established under paragraph (c) 
must be reduced by an amount equal to the difference in 
revenues.  The commission shall, as part of these proceedings, 
permit the telephone company to increase the prices for services 
subject to emerging competition to recover the revenue 
reduction.  To determine whether a rate change has resulted in 
lower or higher revenues from a service subject to emerging 
competition, the rate in effect when the accounting requirement 
prescribed by this paragraph became effective must be subtracted 
from the rate in effect on the date the rate proceeding is 
commenced.  For services priced on an individual basis, the 
change in rates must be calculated by subtracting the average 
revenue per unit for the service on the date the accounting 
requirements of this paragraph became effective from the average 
revenue per unit for the service in the test year used in the 
rate case.  The difference for both individually priced and 
nonindividually priced services must be multiplied by the number 
of units sold in the test year used in the rate case.  A rate 
change resulting from a pass-through of cost increases or 
decreases, approved or reallocated by a government entity, must 
be excluded from the revenue calculations under this paragraph. 
    Sec. 17.  Minnesota Statutes 1988, section 237.62, 
subdivision 2, is amended to read: 
    Subd. 2.  [CROSS-SUBSIDIZATION.] A telephone company 
shall may not subsidize its competitive services from its 
noncompetitive services through allocations of costs, 
cost-sharing agreements, or by other means, direct or indirect.  
When an investment is for both noncompetitive and competitive 
services, the company shall demonstrate that the benefits 
received by the noncompetitive customers justify the allocation 
of costs its proposed by the company.  Allocations and cost 
assignments must be reviewed at least every five years and a 
report detailing the methods and results must be filed with the 
department and the commission.  An independent telephone company 
or a municipality or cooperative telephone association is not 
required to file a report as required by this subdivision 
provided that its allocations and cost assignments are subject 
to review upon order of the commission methods of cost recovery 
between competitive and noncompetitive services are reasonable.  
If the commission determines that the methods chosen by the 
company are not satisfactory reasonable, the commission may 
order changes in the methods used and make necessary prospective 
adjustments in noncompetitive rates being charged to reflect the 
changes in cost. 
    Sec. 18.  [237.625] [INCENTIVE REGULATION.] 
    Subdivision 1.  [INCENTIVE PLANS.] (a) A telephone company 
whose general revenue requirement is determined under section 
237.075 may petition the commission for approval of an incentive 
plan.  The incentive plan must apply to the noncompetitive 
services of a company covered by section 237.62, subdivision 1, 
and must apply to noncompetitive services and services subject 
to emerging competition if the company has chosen to be governed 
by section 237.62, subdivision 1a.  The purpose of the plan is 
to provide an incentive to the company to improve its operating 
efficiency while maintaining or improving the quality of its 
service.  If a telephone company is able to increase its 
earnings, the telephone company shall share the increased 
earnings with its customers to the extent and in the manner set 
forth in the commission-approved plan.  The commission may not 
approve a plan that does not meet the requirements of this 
paragraph and paragraphs (b) to (e). 
    (b) A telephone company shall share increased earnings 
during the term of the incentive plan with its customers either 
by giving them credits against bills or by lowering rates.  The 
division of increased earnings between the company and the 
customers must reflect the degree to which the company has 
assumed a risk of earning less than its revenue requirement and 
the degree to which the customers have assumed a risk of rate 
increases. 
    (c) The incentive plan must be in effect for at least two 
years. 
    (d) The incentive plan must provide for periodic reporting 
to the commission to document that the sharing requirements of 
the plan are being properly implemented.  The company's rates 
and earnings under the plan are not subject to section 237.081, 
subdivision 2, paragraph (b), except to the extent necessary to 
enforce the sharing provisions of the incentive plan. 
    (e) An incentive plan may not permit rate increases except 
under other provisions in this chapter.  The plan may, however, 
permit the direct pass-through of cost decreases and increases 
approved or reallocated by a governmental entity, except for 
changes in intrastate depreciation schedules. 
    Subd. 2.  [ADOPTION OF A PLAN.] Before acting on a petition 
for approval of an incentive plan, the commission shall conduct 
any public meetings it may consider necessary.  The commission 
shall require the petitioning telephone company to provide 
notice of the proposed plan to its customers, along with a 
summary description of the plan provisions and the dates, times, 
and locations of public meetings scheduled by the commission.  
In addition to public meetings, the commission shall conduct a 
proceeding under section 237.61 to decide whether to approve the 
plan.  The commission shall issue findings of fact and 
conclusions concerning the appropriateness of the proposed plan 
and the terms and conditions of the sharing of increased 
earnings between the company and its customers.  The commission 
may approve, reject, or modify a proposed plan, but may not 
order that a modified plan take effect without the agreement of 
the petitioning telephone company.  The commission shall reject 
a plan if it has substantial reason to believe that existing 
rates are inappropriate.  The commission shall issue its 
decision on a plan within six months after receiving the 
petition to approve the plan.  If the commission does not act 
within six months, the plan is deemed withdrawn unless the 
commission and the petitioning company agree to an extension of 
the time for commission action. 
    Sec. 19.  Minnesota Statutes 1988, section 237.63, 
subdivision 1, is amended to read: 
    Subdivision 1.  [GENERAL.] Notwithstanding A telephone 
company whose general revenue requirement is determined under 
section 237.075, may also set or change its rates for 
noncompetitive services may be set or changed subject to under 
this section.  
    Sec. 20.  Minnesota Statutes 1988, section 237.63, is 
amended by adding a subdivision to read: 
    Subd. 4a.  [SIGNIFICANT CHANGE IN CONDITION OF SERVICE.] If 
the terms or conditions of service in a tariff are changed in a 
way that substantially changes the application of the tariff, 
but the price is not changed, the change in the tariff may take 
effect according to the schedule governing rate reductions in 
subdivision 4. 
    Sec. 21.  Minnesota Statutes 1988, section 237.63, is 
amended by adding a subdivision to read: 
    Subd. 4b.  [NEW SERVICES.] A telephone company may offer a 
new service to its customers ten days after it files a tariff 
with the department and the commission. 
    Sec. 22.  Minnesota Statutes 1988, section 237.63, is 
amended by adding a subdivision to read: 
    Subd. 4c.  [OTHER CHANGES.] A tariff change not covered by 
subdivisions 1 to 4b and not requiring a review of a telephone 
company's gross revenues must be reviewed in accordance with 
section 237.075, subdivisions 1 and 2, except that the 
commission may order the company to provide whatever notice to 
potentially affected customers that the commission considers 
appropriate. 
    Sec. 23.  Minnesota Statutes 1988, section 237.64, 
subdivision 1, is amended to read: 
    Subdivision 1.  [REGISTRATION.] A person, firm, or 
corporation seeking to offer a telephone service to the public 
that is classified as competitive become a telephone company, as 
defined by section 237.01, subdivision 2, and not required to be 
certified under section 237.16, shall register with the 
department and the commission 30 90 days before beginning 
operation in the state.  The commission may review the proposed 
rates and services and the financial conditions of the telephone 
company and may, under section 237.081, investigate any other 
matter it considers appropriate to protect the public interest.  
A telephone company that has been authorized by the commission 
to provide telephone services in this state prior to August 1, 
1987, is not required to register under this subdivision.  A 
person, firm, or corporation seeking to offer a noncompetitive 
service to the public must obtain authority from the commission 
under section 237.16.  
    Sec. 24.  Minnesota Statutes 1988, section 237.64, 
subdivision 2, is amended to read: 
    Subd. 2.  [BOND.] Telephone companies offering services 
that have been found to be competitive registered under 
subdivision 1 shall maintain a bond if the company requires 
advance payments or deposits from its customers, unless waived 
by the commission.  The bond must be issued by a surety company 
admitted to do business in this state in the principal sum of 
all deposits and advance payments to be held by the company.  
The department shall determine the amount of the bond and may 
require the company to supply information to determine the 
appropriate amount of the bond.  The bond must be in favor of 
the state for the benefit of any customer who suffers the loss 
of a deposit or advance payment due to insolvency, cessation of 
business, or failure to return any unused portion of the deposit 
or advance payment.  The bond must be filed with the department. 
    Sec. 25.  Laws 1987, chapter 340, section 26, is amended to 
read: 
    Sec. 26.  [EFFECTIVE DATE.] 
    Sections 1 2 to 12 are effective August 1, 1987, and are 
repealed effective August 1, 1992 1994. 
    Sec. 26.  [REPEALER.] 
    Minnesota Statutes 1988, sections 237.075, subdivision 1a, 
and 237.081, subdivision 3, are repealed. 
    Sec. 27.  [EFFECTIVE DATE.] 
    Sections 1 to 26 are effective July 1, 1989.  Sections 8 to 
18 are repealed, effective August 1, 1994. 
    Presented to the governor May 5, 1989 
    Signed by the governor May 8, 1989, 2:28 p.m.