COMMISSION WASHINGTON UTILITIES AND ) TRANSPORTATION COMMISSION, ) Docket No. UT-970766 Complainant, ) Volume 13 ) Pages 951 - 1166 vs. ) U S WEST COMMUNICATIONS, INC., ) Respondent. ) ----------------------------- ) A hearing in the above matter was held on December 15, 1997 at 9:00 a.m. at 1300 South Evergreen Park Drive Southwest, Olympia, Washington, before Chairwoman ANNE LEVINSON, Commissioners RICHARD HEMSTAD, WILLIAM R. GILLIS and Administrative Law Judge C. ROBERT WALLIS. The parties were present as follows: U S WEST COMMUNICATIONS, INC. by LISA ANDERL, Attorney at Law, 1600 7th Avenue, Room 3206, Seattle, Washington 98191. FOR THE PUBLIC, ROBERT F. MANIFOLD, Assistant Attorney General, 900 Fourth Avenue, Suite 2000, Seattle, Washington 98164. WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION STAFF, by GREGORY TRAUTMAN, Assistant Attorney General, 1400 South Evergreen Park Drive Southwest, Olympia, Washington 98054. AMERICAN ASSOCIATION OF RETIRED PERSONS, by RONALD L. ROSEMAN, Attorney at Law, 2011 14h Avenue East, Seattle, Washington 98112. Cheryl Macdonald, CSR Court Reporter APPEARANCES (Cont'd.) MCI, by ROGELIO PENA, Senior Attorney, 707 17th Street, Suite 3600, Denver, Colorado 80202 and CLYDE MACIVER, Attorney at Law, 4400 Two Union Square, 601 Union Street, Seattle, Washington 98101. TRACER, by ARTHUR BUTLER, Attorney at Law, 5450 Two Union Square, 601 Union Street, Seattle, Washington 98101. I N D E X WITNESS: DIRECT CROSS REDIRECT RECROSS EXAM JENSEN 957 958 1115 EXHIBITS: MARKED ADMITTED 150T - 168 957 958 171-172C 957 960 173C 957 963 174, 175, 177-214, 957 973 217-234 176 957 974 215 957 976 216 957 235-238 957 1114 239 967 172AC 1033 1033 240C 1082 1083 RECORD REQUISITION: PAGE 4 964 5 1013 P R O C E E D I N G S JUDGE WALLIS: Let's be on the record for our December 15, 1997 session in the matter of Commission docket UT-970766. Is there anything of a preliminary matter before we proceed? It appears that there are none. The company is calling as its witness at this time Ms. Theresa Jensen and numerous exhibits have been identified to come through Ms. Jensen. I'm going to read those in numerical order. The direct testimony of Ms. Jensen is marked as Exhibit 150T for identification. Exhibit 151 for identification is TAJ-1 complaints. 152 is TAJ-2 revenue requirement adjustments. 153 is TAJ-3 rate reduction. 154 is TAJ-4, residence rate comparison. 155 is TAJ-5 comparison of local exchange service tariffs. 156 is TAJ-6 comparison of local exchange service offerings. 157 is TAJ-7 service results. Ms. Jensen's supplemental testimony is marked as 158T. Her rebuttal testimony is marked as 159T. Her attachment TAJ-8, rate spread, is marked as 160. TAJ-9, exchange and network service, is marked as 161. TAJ-10 TCG contracts is marked as 162. TAJ-11, Geppert and Anderson comparison, is 163 for identification. I'm marking as 164 for identification the attachment TAJ-12, residence rates. 165 is TAJ-13, census data. 166 is TAJ-14 revenue sources. 167 is TAJ-15, U S WEST service performance and 168 is TAJ-16 residence customer feedback. In addition, public counsel has presented numerous potential exhibits for cross-examination, and I am marking those documents as follows: Document PC 6-152 is Exhibit 171 for identification. PC 11-254 is 172 for identification. Cross exhibit SQ-1 is 173 for identification. TRA 03-011 is 174 for identification. TRACER 3-12 is 175 for identification. U S WEST advertisement from Wall Street Journal is 176 for identification, and PC 466 is 177C for identification. Exhibit 178 for identification is PC 6-136. 179 is PC 6-138. 180 is PC 6-142. 181 is PC 6-143. 182C is PC 6-147. 183C is PC 6-151. 184 is PC 8-193. 185 is PC 8-194. 186 is PC 11-274. 187 is PC 8-199. 188 is PC 8-200. 189C is PC 8-201. 190 is PC 11-256. 191, PC 11-257. 192 is PC 11-259. 193 is PC 11-262. 194 is PC 11-264. 195 is PC 11-269. 196 is PC 11-270. 197 is PC 11-273. 198 is PC 14-310. 199 is PC 14-297. 200 is PC 14-298. 201 is PC 14-303. 202 is PC 14-305. 203 is PC 14-307. 204C is 14-308, attachment B. 205 is PC 14-311. 206 is PC 14-313. 207 is PC 14-314. 208 is PC 14-320. 209C is PC 14-326. 210 is PC 14-327. 211 is PC 14-296. 212 is PC 17-367. 213 is PC 17-369. 214 is U S WEST's third set of data requests to public counsel. 215 is letter from Earl Sedlik. 216 is public counsel matrix data request responses. 217 is PC 06-150. 218C is PC 06-151. 219C is PC 11-268. 220 is PC 11-268, lines using Internet. 221 is PC 14-302. 222 is PC 14-328. 223 is PC 14-330. 224C is PC 17-363. 225 is PC 21-482. 226 is PC 21-490. 227 is PC 21-492. 228 is PC 21-497. 229 is PC 21-502. 230 is PC 21-506. 231, PC 21-507. 232C is PC 21-510. 233 is PC 21-511. 234 is PC 21-513. In addition, AARP has identified four documents that may be introduced through Ms. Jensen. Exhibit 235 for identification is identified as a two page document consisting of a Montana Public Service Commission press release and attachment. 236 is a Colorado Public Service Commission news release. 237 is a two-page news release from Oregon dated November 26, 1997, and 238 is an Oregon Public Utilities Commission news release dated October 21, '97. Public counsel has also indicated that he has some additional documents that may be marked for identification in conjunction with Ms. Jensen's appearance and we are reserving Nos. 239 through 299 for those documents. (Marked Exhibits 150T - 238.) DIRECT EXAMINATION BY MS. ANDERL: Q. Ms. Jensen, would you please state your name and your business address for the record. A. Theresa Jensen, 1600 Seventh Avenue, Room 3011, Seattle, Washington, 98191. Q. And did you file in this matter the prefiled direct testimony, supplemental testimony and rebuttal testimony that the administrative law judge has just identified along with the exhibits attached thereto, Exhibits 150T through and including 168? A. Yes, I did. Q. Do you have any changes or corrections to make to that testimony or those exhibits at this time? A. Yes. I have one change to my rebuttal testimony, Exhibit 159T. On page 15, line 19, about mid sentence starting with "experience in other U S WEST states," if you would strike the remainder of that sentence on line 19, strike line 20 and then lines, 2 and 3 on page 16 as well as footnote 7. Q. Any other changes or corrections to make? A. I believe that is it. Q. And with that change, then, is your prefiled testimony in this matter true and correct to the best of your knowledge and belief? A. Yes, it is. MS. ANDERL: Your Honor, U S WEST offers Exhibit 150T, 151 through 157, 158T, 159T and 160 through 168 and Ms. Jensen is available for cross-examination. JUDGE WALLIS: Is there any objection to the exhibits. MR. MANIFOLD: No. JUDGE WALLIS: The exhibits are received. (Admitted Exhibits 150T - 168.) JUDGE WALLIS: Mr. Manifold. CROSS-EXAMINATION BY MR. MANIFOLD: Q. Good morning. A. Morning. Q. Let's pick up -- could you look, please at your rebuttal testimony, page 20, line 20 and 21. Should the sentence that begins "TRACER's proposal" be stricken along with the ones you just struck? A. Yes. Thank you for pointing that out. Q. I did not find in your testimony a resume or curriculum vitae like for the other witnesses. Could you please provide that for us orally? A. Yes. I would be glad to. I will just stick with what may be relevant, and that is that I began to work for Pacific Northwest Bell in 1972 and I have been there through my current position. I've held a number of positions within the company, both as an occupational employee and as a management employee. Spent a number of years in the business office. I was also a directory assistance operator and from there went into marketing, into sales, into product management, product development, strategic planning and Washington regulatory. Q. Has all of that been in Seattle? A. I've been based out of Seattle my full career. I did work over a year's time for Bell Tricore Services in which I did federal work. Q. And your educational background? A. My educational background consists primarily of college at North Seattle Community College. Q. And do you have before you our stack, particularly public counsel 152, 254 which have been marked as exhibits 171 and 172? A. Yes, I do. Q. Do you recognize those to be the company's answers as provided to us? A. Yes, I do. MR. MANIFOLD: Your Honor, I would move for the admission of Exhibits 171 and 172. A. I have one comment on Exhibit 250 -- JUDGE WALLIS: Let me ask if there are objections. MS. ANDERL: No. JUDGE WALLIS: The exhibits are received. (Admitted Exhibit 171 and 172C.) THE WITNESS: Your Honor, if I may. On 254 I believe there was a supplemental response. I'm not sure if it went out or not. Q. Is that something that you checked this morning and be happy to supplement this if there is one? A. Yes. I wasn't sure if you might have it. MS. ANDERL: And Your Honor, Exhibit No. 172 should be 172C. JUDGE WALLIS: So noted. Q. In your rebuttal testimony you say that your Exhibit TAJ-1 demonstrates -- I'm on page 29, line 2 and 3 -- you say that the company has had dramatic reductions in service quality complaints and the company basically looks forward to continued improvements. Is that a reasonable summary? A. Yes, it is. Q. You go on to state that the revenue requirements should not be further adjusted based on service quality performance especially when the performance is improving. Is that the company's position? A. Yes, it is. Q. Is this -- are these points directed to the incentive compensation issue? A. As well as other issues, yes. Q. In Exhibit 171 you discuss the things that are done for consumers whose installations have been missed or who have not gotten a phone for a certain number of days. Should we call that the guarantee program? A. Yes. Q. And Exhibit 172C indicates the number of instances of the various types of problems that are outlined in Exhibit 171; is that right? A. Yes. It's incomplete right now, though. Q. Without the supplement? A. Yes. Q. Does the supplement change this information or add more to it? A. It adds more information. It defines the number of cellular loaner instruments that have been provided, the number of cellular credits or other options selected by customers who were unable to receive service within 30 days. Q. And does that include the current exhibit, a listing of the amount of revenues waived during '96 as a result of the various problems that are mentioned? A. Well, generally the options that are in the supplement, unfortunately that we don't have, are credits where the information that you do have before you is where charges have been waived. The other is where there is not a charge and the customer has been provided additional service. Q. Could you take a look, please, at what's been marked as Exhibit 173. That's the one that's -- in the top right-hand corner it says public counsel cross exhibit SQ-1. Do you have that? A. Yes, I do. Q. Would you accept subject to your check that this is a compilation of the information that's contained in 171 and 172 in which case we should make it 173C? A. Yes, I would, and I did happen to check it this weekend and it is accurate. Q. Should it be a confidential Exhibit 173? A. Yes. JUDGE WALLIS: So noted. MR. MANIFOLD: Your Honor, I would move for the admission of Exhibit 173C. MS. ANDERL: No objection. JUDGE WALLIS: The exhibit is received. (Admitted Exhibit 173C.) Q. Is the conclusion or a conclusion from Exhibit 173C that total test year revenue credits were about $3.2 million? A. As it relates to these specific credits, yes. Q. Are you aware of whether there's been any adjustment for ratemaking purposes for those credits by any of the revenue requirement witnesses? A. I heard the discussion last week. I'm not certain, but I would be glad to get that information. Q. Would you accept subject to your check that there has not been? A. I just don't know. Q. If we could make that the next record requisition? JUDGE WALLIS: It would be No. 4) (Record Requisition 4.) Q. And that would be whether there has been an adjustment by the company, the staff or public counsel for these credits, and if so, where. Does that work? A. (Nodding head.) Q. You were here for all the testimony last week? A. Most of it. Q. I wasn't going to ask if you heard all of it. You would confirm that in this state and in particular in the last Commission case or the last company case the Commission uses an historical period not a projected test period for revenue requirements purposes? A. Well, I believe that the Commission uses the test period presented by the company. I don't believe the Commission defines the test period. I believe the company defines it when it files its rate case. Q. And would you agree that the Commission's policies and procedures call for using an historical test period when the companies file their cases? A. I would refer to the specific Washington administrative code that defines what the company may use. I believe that to traditionally be historical in that the time period is past but it may just be by a few months. Q. Mr. Culp was kind enough to refer to you some questions regarding late payment charges. Do you recall that? A. Yes, I do. Q. Have you paid him back yet? Is it correct that since this case was filed actually the company has received permission to assess a late payment charge? A. Yes, they have. Q. And that was approved on November 6. Would you accept that subject to check? A. Yes, I do. Q. Is it correct that the company provided a confidential estimate of the effect of implementing that late payment charge? A. Yes. MR. MANIFOLD: Your Honor, this is one we didn't manage to get copied, this document, and I would propose, since it's confidential, and we don't want to say any of the numbers out loud to simply put the document in rather than fence around any of the numbers on it. MS. ANDERL: Is it a response to a data request? MR. MANIFOLD: No, it isn't. It was only provided to staff in connection with -- it's a company document, and my understanding, let me ask. Q. Ms. Jensen, did the company provide to the staff as a confidential work paper on July 29, 1997 information concerning the Washington late payment charge filed? A. I cannot confirm what date it was provided, but I am aware, if this is the information I gave Mr. Roseman Friday, then, yes, we did provide it in support of that filing. MR. MANIFOLD: May I approach the witness? THE WITNESS: Thank you. MR. MANIFOLD: Your Honor, I apologize for not having copies of this document made. JUDGE WALLIS: You're asking that that be identified as an exhibit? MR. MANIFOLD: Yes, please. JUDGE WALLIS: Let's assign No. 239 to that. (Marked Exhibit 239.) JUDGE WALLIS: What can we call it? Q. Ms. Jensen, would "late payment charge support documentation" be an appropriate label for this? A. That would be fine. Q. Looking at third page of the document -- and this is the only question I'm going to ask about this since we don't have copies -- there's a revenue impact. Does that constitute the company's best estimate of the positive effect on its revenues from adopting the 1 percent late payment charge? A. Yes, it does. Q. And there's an attachment to the document that has a lot of numbers on it that shows the derivation of that. That's the revenue analysis? A. Yes. There might be a comment that would be useful with respect to this issue. Q. Please make it. A. In terms of our negotiations with the Commission staff on this subject when we got into a different area with respect to uncollectibles expense, the company felt that the amount of the 1996 test year was the proper amount to include in this case, and the staff proposed something different than that, and we reached agreement with the understanding that this late payment charge would be made as a part of that compromise on the company's part. Q. Do you recall the testimony of Mr. Culp, the written testimony, something to the effect that the company was not able to do credit reference checks on customers? A. Yes. Q. And I started to ask him about that and he referred that to you as well? A. Yes. Q. Isn't it the case that the company is specifically allowed under the appropriate WAC to look at the prior payment history and creditworthiness of potential customers when extending service to them but not allowed to look at credit reporting agencies' reports? A. Well, I would answer that a little differently. I think the company is free to not only look at the customer's previous credit history but also may look at credit history of payments to other agencies. What the company is precluded from doing is based on credit history information obtained through, for instance, a credit bureau on how they pay their Visa bill or how they pay their mortgage. The company is precluded by the Commission's current rules from collecting a deposit or otherwise securing that account when they know that that customer is a poor credit risk, and even in some instances when they're a known U S WEST prior credit record risk we are not able to secure the account. Q. Taking the first half of your answer, you say when they're a known credit risk, you mean known based upon a credit reporting agency report? A. And/or U S WEST records, both. Q. Can we take one of those at a time? A. Sure. Q. The first one is the utility's awareness is based upon the accuracy of a credit reporting agency's report for the first part of your answer. A. Could you perhaps rephrase your question? I'm a little confused by what you're asking. Q. In your original answer you said the company is prohibited from requiring a deposit even when they know the person is a credit risk? A. Yes. Q. And I'm trying to explore how the company knows the person is a credit risk and the quote knowing they're a credit risk is based upon the company having reviewed either of two things, you said. One it would be a credit reporting agency report, and that would be one part? A. One of several, yes. Q. And the other would be prior history with U S WEST itself? A. Yes, that would be another. Q. You're not suggesting, are you, that as a blanket statement the company is prohibited from looking at the credit worthiness of potential customers when assessing whether or not to extend service or require deposit? A. If I understood your question correctly they're not prohibited from looking at the information. They're prohibited from acting upon the information dependent upon what it is. Q. And some information, like payment history with previous utility bills U S WEST is allowed to act on for assessing whether deposit should be paid? A. I would disagree with that. U S WEST is allowed to act on its own credit history information or that of another telephone company. I don't believe it's broadly applied to any utility, for instance, their electric bill or water bill. Q. So prior history with any telecommunications company is a factor that the WAC allows the company to take into account in assessing a deposit? A. Yes. And I believe that is qualified to within a set period of time. I don't have the WAC in front of me. Q. So the record is clear, we're talking about -- would you accept subject for your check WAC 480-120-056? A. Yes. Q. And the company isn't suggesting by Mr. Culp's testimony that it's employing some lesser standard than the ones that are in here, in other words, that it's not looking at the credit worthiness of potential customers as it is allowed to do under this WAC? A. No. I believe all Mr. Culp was addressing was the company's inability to act on that information. Q. But would you -- MS. ANDERL: Excuse me, Mr. Manifold. If I might just provide the witness with a copy of the rule that's been referenced. MR. MANIFOLD: Certainly. I had extras but I can't find them. Q. Well, would you accept that the company can act on some pieces of information and cannot act on other pieces of information? A. That's correct. Q. So there are some pieces of information regarding a potential customer's credit history that the company is specifically authorized to utilize in making a deposit? A. Well, it's fairly narrow the piece of information that can be relied upon. Q. Excuse me, but we have this little start with a yes or no. A. Well, I'm having trouble with your use of the word "some." There's one piece of information that can be relied upon to secure an account and that is very clearly defined in the rules, and I understand that to be their prior telecommunications service credit history within a specified period of time. Q. And when Mr. Culp said the company is not able to look at the prior credit history there is at least one piece of information regarding prior credit history that is specifically authorized by the WAC? A. That's correct. His reference was to credit agency information. Q. Do you have before you what's been marked as the other public counsel cross-examination exhibits which is 174 through 234? A. Yes, I do. Q. With the exception of the Wall Street Journal advertisement, would you accept that all of those are -- excuse me, and 215 and 216 -- would you accept that all of those are material that the company prepared? A. I understand it to be that, yes. If they're company responses, yes. Q. And one of them is company data requests, just to be clear. MR. MANIFOLD: Your Honor, I would move for the admission of the indicated exhibits. MS. ANDERL: No objection. JUDGE WALLIS: The exhibits are received. (Admitted Exhibits 174, 175, 177 - 214 and 217 - 234.) Q. Do you have in front of you what was marked as Exhibit 176 which is the advertisement? A. Yes, I do. Q. Can you verify that that is a U S WEST advertisement as depicted that appeared in the Wall Street Journal as indicated? A. Yes. MR. MANIFOLD: Your Honor, I would move for the admission of 176. JUDGE WALLIS: Objection? MS. ANDERL: No. JUDGE WALLIS: Received. (Admitted Exhibit 176.) Q. Do you have in front of you what's marked as Exhibit 215 which is the letter from Earl Sedlik? I'm not going to ask you questions on it right now. I just want to get it admitted. A. Yes. Q. Do you know if that's one of the letters that was in the packet of materials received by public counsel or the Commission regarding this case? A. I do not know, but by observing it, it was sent to Penny Hansen on September 18. Q. Would you accept subject to your check that that was one of the letters that was so received? A. Yes. MR. MANIFOLD: Your Honor, move for the admission of Exhibit 215. MS. ANDERL: Is that being offered for the truth of the matter set forth in the letter? MR. MANIFOLD: It's being offered to show what Mr. Sedlik's opinion about those matters are. MS. ANDERL: And you're not presenting Mr. Sedlik as a witness in this matter. MR. MANIFOLD: No, we didn't have time. Your Honor, by the way, you had asked for indications of specific problems with time. Were there somewhat more time we would have attempted to contact Mr. Sedlik and a few other people who submitted quite voluminous letters in order to see if they wanted to become witnesses in order to put their particular service quality information into the record in a way that doesn't normally occur. MS. ANDERL: Your Honor, I object to that representation. Mr. Sedlik's letter is dated September 18. Certainly there's been plenty of time since then, and I don't think that that is a valid suggestion for public counsel to make at this point in the proceeding. JUDGE WALLIS: Let's move on to the question of admissibility of the document. MS. ANDERL: I would object on the basis of hearsay if it's offered for the truth of the matter contained therein. If it's simply offered to represent Mr. Sedlik's opinion we wouldn't object. JUDGE WALLIS: I heard Mr. Manifold make that representation. Is that correct? MR. MANIFOLD: Yes. JUDGE WALLIS: The document is received. (Admitted Exhibit 215.) Q. Do you have in front of you what's been marked as Exhibit 216? It's entitled Public Counsel Matrix Data Request Responses from U S WEST? It's in today's packet. A. Yes, I do. Q. I would represent to you that this was prepared by our office, not yours. You've generally been tracking this case and the data requests and responses and so forth? A. While I've been in the office or when I've been in the office, yes. Q. Would you accept subject to your check that this matrix presents a summary, as of the date it was prepared, of the dates that public counsel provided various data requests to the company and the dates that those were received or objected to or whatever? MS. ANDERL: Your Honor, I don't know that it is fair at this point to ask the witness that type of a question subject to check. However, we would be happy to attempt to review this prior to the end of the hearing to verify its accuracy and make whatever representation we can on the record with regard to that. MR. MANIFOLD: That will work for now. MS. ANDERL: It's not the type of question that's usually asked subject to check which is more typically a calculation or single piece of information that can be easily checked or verified. MR. MANIFOLD: That's fine for now. And I would note, by the way, that this was prior to any of the documents that were provided to us here in the hearing room, so it's not up to -- it's up to date as of last Wednesday I think. THE WITNESS: Your Honor, can I have one moment with my counsel, just 30 seconds, on a different matter? JUDGE WALLIS: Yes. MS. ANDERL: Thank you, Your Honor. JUDGE WALLIS: Where are we with regard to 216? MR. MANIFOLD: I understood the company to request some time to look that over during the day and that's fine. JUDGE WALLIS: We'll reserve ruling on that. Q. Would you say that U S WEST's market in Washington is fully competitive? A. Yes, I would. Q. All of it? A. I believe that the court deemed it to be so, yes. Q. When you say fully competitive, what do you mean? A. That no provider is prohibited from offering service in the state of Washington. Q. Period? A. Period. Q. Could you please look at Exhibit 199 which is the response to public counsel 297. Has the company conducted any analysis of the degree of competition that it phases in various markets and sub markets in the state? A. Yes. Q. Looking at this exhibit, the second paragraph from the bottom on the first page says U S WEST has provided all of the information available to it concerning the extent of the competition. What is the information that you had in mind there? A. There have been other discovery responses with information submitted but primarily my exhibits in both my direct and rebuttal testimony, specifically Exhibit TAJ-5. Would it be easier to use -- THE WITNESS: Your Honor, would it be easier to use your exhibit numbers as opposed to mine? JUDGE WALLIS: Yes. A. 155 then. 156, 162. I believe that would be the bulk of them. There may be a few that I've left out. Q. Your comment about there being competition or the state being fully competitive is not offered as an expert opinion as an economist, correct? A. I am not an economist if that is your question. Q. So that opinion is not being offered as an expert opinion but rather -- A. As an economist, no. I believe that I'm very familiar with what has occurred within U S WEST's territory and the competitive activity that is publicly a