|
Order
CRTC
2000-531
|
|
Ottawa, 9 June 2000 |
|
Télébec
ltée
–
Rate
restructuring
Tariff
Notice 239 |
|
The
Commission
approves,
by
majority
decision,
Télébec
ltée's
application
to
restructure
its
rates
for
basic
residential
local
service.
Most
of
Télébec's
residential
subscribers
will
experience
monthly
basic
rate
increases
ranging
from
$0.47
to
$4.00
effective
1
July
2000.
|
1.
|
The
Commission
received
an
application
from
Télébec
ltée
dated
18
February
2000,
that
proposed
to
consolidate
its
rate
groups
for
basic
residential
local
service
effective
1 May
2000. |
2.
|
Télébec
indicated
that
the
main
reason
for
the
proposed
rate
restructuring
was
to
make
up
for
the
revenue
reduction
due
to
the
depletion
of
an
accounting
reserve
for
pole
rental,
beginning
in
2000.
As
directed
by
the
Commission,
Télébec
amortized
the
balance
of
$6,000,000
in
the
accounting
reserve
over
two
years,
including
$2,900,000
in
1998
and
$3,100,000
in
1999.
The
proposed
rate
restructuring
would
generate
additional
revenues
of
$3,245,000
annually
for
the
company. |
3.
|
Télébec
indicated
that
the
restructuring
would
simplify
the
rate
schedule
by
consolidating
the
current
total
of
32
rate
groups
into
four
rate
groups,
including
the
extended
area
service
component.
The
proposal
would
also
bring
rates
closer
to
the
cost
of
providing
service. |
4.
|
Télébec's
residential
customers
currently
pay
between
$22.93
and
$34.43
a
month
(an
average
of
$29.09)
for
residential
local
service.
With
the
proposed
restructuring,
the
average
rate
for
residential
local
service
would
be
$31.03,
i.e.,
an
average
increase
of
$1.93
or
6.6 percent. |
5.
|
To
avoid
rate
shock,
Télébec
decided
to
limit
subscriber
rate
increases
to
a
maximum
of
$4.00.
Thus,
most
subscribers
will
face
rate
increases
ranging
from
$0.47
to
$4.00.
For
some
exchanges,
the
company
proposes
to
maintain
the
current
rates. |
6.
|
Two
interested
parties
filed
comments:
Action
Réseau
Consommateur
(ARC)
and
the
Association
coopérative
d'économie
familiale
des
Bois-Francs
(ACEF).
In
addition,
written
comments
were
received
from
over
70
subscribers,
as
well
as
petitions
and
form
letters
containing
in
excess
of
3,600 signatures.
All
interventions
related
to
this
application
opposed
the
rate
increases
arising
from
the
proposed
restructuring. |
7.
|
ACEF
suggested
that
Télébec
was
confusing
rate
rebalancing
with
rate
restructuring.
Both
ACEF
and
ARC
noted
that
the
company
is
merely
using
rate
restructuring
(which
should
not
be
used
to
generate
additional
revenues)
as
a
pretext
to
generate
additional
revenues
that
were
denied
in
Time-frame
for
the
implementation
of
price
cap
regulation
and
rate
rebalancing
for
Québec-Téléphone
and
Télébec
ltée,
Telecom
Decision
CRTC
99-19,
dated
10
December
1999. |
8.
|
Télébec
replied
that
it
was
proposing
changes
that
were
carefully
designed
to
minimize
rate
increases
for
customers
in
exchanges
where
rates
are
the
least
compensatory,
and
at
the
same
time
make
up
for
the
loss
of
revenue
from
the
accounting
reserve. |
9.
|
Télébec
currently
has
one
of
the
most
complex
rate
schedules
in
Canada.
The
Commission
is
of
the
view
that
this
rate
schedule
should
be
simplified
to
accommodate
a
gradual
transition
from
the
current
earnings-based
regulation
regime
to
price
cap
regulation
in
the
near
future. |
10.
|
The
Commission
considers
that
the
rate
group
consolidation
is
justified.
A
simpler
rate
schedule,
as
proposed
by
Télébec,
would
allow
the
company
to
move
residential
rates
closer
to
costs,
particularly
in
groups
paying
lower
than
average
rates. |
11.
|
The
Commission
notes
that
the
rate
restructuring
proposed
by
Télébec
generates
additional
revenues,
which
results
in
departure
from
the
Commission's
usual
practice
that
such
rate
restructuring
be
revenue
neutral. |
12.
|
The
Commission
notes,
however,
that
the
accounting
reserve
is
depleted,
which
creates
a
revenue
shortfall
for
the
company.
Indeed,
Télébec
proposes
to
use
the
additional
revenues
generated
by
the
rate
group
consolidation
to
offset
the
loss
of
revenue
associated
with
the
depletion
of
the
accounting
reserve. |
13.
|
The
Commission
considers
it
reasonable
for
Télébec
to
be
compensated
for
this
revenue
shortfall
through
the
proposed
rate
restructuring. |
14.
|
In
light
of
the
foregoing,
the
Commission,
by
majority
decision,
orders
that: |
|
a)
the
rate
amendments
proposed
by
Télébec
under
Tariff
Notice 239
are
approved
effective
1
July
2000;
and |
|
b)
Télébec
is
directed
to
issue
forthwith
revised
tariff
pages
reflecting
the
above
approval. |
|
Secretary
General |
|
This
document
is
available
in
alternate
format
upon
request
and
may
also
be
examined
at
the
following
Internet
site:
http://www.crtc.gc.ca
|
|
Dissenting
opinion
of
Commissioner
Barbara Cram |
|
I
respectfully
disagree
with
my
colleagues
in
the
majority
for
the
following
reasons: |
|
a)
the
majority
decision
is
inconsistent
with
the
Commission's
findings
in
Time-frame
for
the
implementation
of
price
cap
regulation
and
rate
rebalancing
for
Québec-Téléphone
and
Télébec
ltée
,
Telecom
Decision
CRTC
99-19,
10
December
1999. |
|
b)
There
are
no
special
circumstances
to
justify
the
departure
from
the
Commission's
policy
that
generally
rate
restructuring
should
be
revenue
neutral. |
|
c)
In
my
view
the
rates
approved
are
not
just
and
reasonable
and
they
strike
an
inappropriate
balance
between
Télébec's
shareholders
and
its
subscribers. |
|
As
a
result
I
would
have
denied
the
application. |
|
Context
|
|
Télébec
already
has
the
highest
average
residential
rates
in
Canada
at
$29.09
per
month.
Indeed,
the
cumulative
impact
on
Télébec's
residential
subscribers
is
such
that
the
average
rate
has
risen
to
172%
of
the
1995
average
rate. |
|
In
its
application,
Télébec
submitted
that
the
increases
were
necessary
in
order
for
the
company
to
be
within
its
approved
rate
of
return
range
of
10.4%
to
12.4%.
Télébec
argued
that
absent
approval
of
its
application,
the
company's
rate
of
return
would
be
10.3%
for
the
Utility
segment,
i.e.
0.1%
below
the
bottom
of
the
range.
In
my
view,
Télébec's
financial
assumptions,
upon
which
the
company
predicates
its
assertion,
are
flawed.
For
example,
contrary
to
normal
practice,
the
company's
application
failed
to
take
into
account
any
potential
revenues
from
rate
increase
applications
pending
before
the
Commission.
If
Télébec
had
taken
into
account
all
revenues
that
are
typically
taken
into
account
in
applications
of
this
nature,
I
am
persuaded
that
the
company's
forecast
ROE
would
have
been
within
the
approved
range.
Accordingly,
in
my
view,
Télébec
does
not
require
rate
relief.
Moreover,
with
approval
of
this
application,
the
rate
of
return
for
the
Utility
segment
may
well
be
in
excess
of
the
midpoint
of
the
authorized
range.
In
stating
this
I
do
not
wish
to
imply
that
I
would
have
approved
this
application
given
my
view
that
Télébec's
forecast
ROE
is
within
the
authorized
range.
It
is
stated
simply
to
illustrate
the
size
of
the
transfer
of
monies
from
Télébec's
residential
subscribers
to
the
company's
shareholders
as
a
result
of
approval
of
this
application. |
|
Decision
99-19 |
|
Approximately
six
months
ago
the
Commission
established
the
time
frame
and
made
certain
findings
with
respect
to
the
transition
period
prior
to
the
implementation
of
price
cap
regulation
for
Télébec.
Among
the
Commission's
findings
were
the
following: |
|
a)
at
paragraph
10,
"The
Commission
finds
that
it
is
not
appropriate
at
this
time
to
introduce
rate
rebalancing
in
2000
and
2001." |
|
b)
at
paragraph
11,"The
Commission
notes
that
it
has
already
approved
substantial
increases
in
local
residential
rates
for ...
Télébec
in
recent
years.
The
Commission
considers
that
the
subscribers
...
of
Télébec
have
already
contributed
significantly
to
the
reduction
of
the
companies'
contribution
requirements." |
|
c)
at
paragraph
13,
"Québec-Téléphone
and
Télébec
are
permitted
to
apply
to
increase
their
rates
if
the
companies
consider
that
they
will
not
have
the
opportunity
to
achieve
a
reasonable
rate
of
return
on
the
Utility
segment.
If
the
companies
do
apply,
the
Commission
will
review
their
applications
in
a
revenue
requirement
proceeding,
including
a
full
examination
of
their
financial
projections." |
|
d)
at
paragraph
16,
the
Commission
stated
that
it
would
permit
Télébec
to
submit
rate
restructuring
applications
but
that
any
such
applications
should
be
revenue
neutral. |
|
In
my
respectful
view,
the
majority
decision
is
inconsistent
with
Telecom
Decision
99-19. |
|
No
special
circumstances
to
justify
departure
from
Commission
policy |
|
To
date,
the
Commission's
policy
has
been
to
deny
rate
restructuring
proposals
that
are
not
revenue
neutral
unless
there
were
special
circumstances
to
justify
a
departure
from
this
policy.
In
my
view,
Télébec
failed
to
demonstrate
that
it
would
be
appropriate
to
depart
from
the
Commission's
policy
in
this
particular
instance. |
|
The
wrong
balance
|
|
As
stated
previously,
residential
subscribers
have
already
seen
their
rates
increased
by
72%
in
five
years.
This
application
represents
a
further
6.6%.
I
am
not
persuaded
by
the
company's
application
that
Télébec's
residential
subscribers
should
have
to
absorb
an
additional
increase
in
this
case.
Further,
I
am
of
the
view
that
approval
of
Télébec's
application
will
lead
to
rates
that
are
neither
just
nor
reasonable. |
|
For
these
reasons,
I
respectfully
disagree
with
the
majority.
I
would
have
denied
the
application.s |
|