BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION
 
WASHINGTON UTILITIES AND   ) Docket No. UT-990946
TRANSPORTATION COMMISSION )
      )
v.      ) COMMISSION DECISION 
      ) AND ORDER APPROVING
1-800-RECONEX, Inc.   ) STIPULATION
. . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . .)

SUMMARY
 
  PROCEEDINGS:  The Washington Utilities and Transportation Commission, 
proceeding on its own motion, filed a Complaint and Order to Show Cause Why 
Penalties Should Not Be Assessed and Why Service Remedies Should Not Be Ordered 
and Notice of Prehearing Conference on July 23, 1999.  The Commission alleged 
by its Complaint that 1-800-RECONEX, Inc.’s service and billing practices were 
in contravention of chapter 480-120 WAC, RCW 80.36.130, and the terms of its 
filed tariff.  RECONEX  filed a Motion for Conversion of Proceeding on August 
11, 1999. Administrative Law Judge Lois Ellen Gold of the Washington Utilities 
and Transportation Commission conducted a prehearing conference upon due and 
proper notice in Olympia, Washington, on August 12, 1999.  A Prehearing 
Conference Order was filed August 13, 1999.
  
  PARTIES:  Gregory J. Trautman, Assistant Attorney General, Olympia, 
Washington, represents Commission Staff (Staff).  William E. Braun, General 
Counsel, Hubbard, Oregon,  represents Respondent 1-800-RECONEX, INC. (RECONEX).

  STIPULATION AND SETTLEMENT AGREEMENT:  On 
October 8, 1999, Commission Staff and 1-800-RECONEX, Inc. filed a Stipulation 
for Settlement and for Entry of an Agreed Final Order (Stipulation).
  
  COMMISSION:  The Commission accepts the Stipulation and Settlement Agreement 
as filed, denies RECONEX’s motion, and cancels the remaining procedural and 
hearing schedule set forth in the Prehearing Conference Order.

MEMORANDUM

I. Procedural History:
  
  The matter was brought before the Commission on its own Complaint, Order, and 
Notice of Prehearing Conference dated July 23, 1999.  The Complaint alleged 
that Respondent RECONEX had violated chapter 480-120 WAC, RCW 80.36.130, and 
the terms of its filed tariff.  RECONEX is a local exchange telecommunications 
company certified under Washington State laws and Commission rules to provide 
prepaid local telecommunications services to individuals who have poor credit 
histories.  The Complaint was based on the results of a Compliance Audit 
conducted by Staff nine months after RECONEX commenced service in Washington 
State and consisted of a review of nineteen customer accounts.

  On August 11, 1999, RECONEX filed a Motion for Conversion of Proceeding on 
the basis that as a relatively new entrant in Washington State, DOCKET NO. 
UT-990946 occasional lapses in compliance with state law and rules do not 
warrant a formal complaint proceeding.

  On August 12, 1999, Administrative Law Judge Lois Ellen Gold conducted a 
prehearing conference in Olympia, Washington.  

  A Prehearing Conference Order was filed on August 13, 1999, that set forth a 
procedural schedule which provided a substantial time window for discussions 
between Staff and Respondent regarding compliance and possible settlement prior 
to hearing.

  On August 23, 1999, Commission Staff filed an Answer in Opposition to   
RECONEX’s Motion.

  On October 8, 1999, Staff and RECONEX filed a Stipulation for Settlement and 
For Entry of An Agreed Final Order.  The parties waive the entry of an initial 
order, pursuant to WAC 480-09-780, ask that the remaining procedural and 
hearing schedule set forth in the Prehearing Conference Order be canceled, and 
agree the record in this matter should be presented directly to the Commission 
for decision. 

II. Stipulation and Settlement Agreement

  Some of the technical analysis stated in this summary is from the necessary 
implications of the actual language of the Settlement Agreement.  As 
interpreted, the Stipulation and Settlement Agreement provides as follows: 

 • The parties waive any right to the entry of an initial order pursuant to WAC 
480-09-780.

•The Order entered pursuant to the Stipulation, and completion of the terms of 
this Stipulation by RECONEX, shall resolve all outstanding disputes raised by 
the Commission’s July 23, 1999, Complaint.

•The Commission will impose $186,000.00 of the $372,000.00 alleged penalties in 
the Complaint and suspend $141,000.00 in penalties, pending timely expenditure 
of the amounts specified in the Stipulation for customer education and service 
improvements.  The Commission will suspend $45,000.00 in penalties, pending the 
outcome of a Compliance Audit of fifty random customer accounts to be conducted 
by Staff in September, 2000.

•RECONEX will spend a minimum of $20,000.00 for a customer education program 
approved by Staff.  Plan development will be completed by December 31, 1999, 
and the implementation date will be approved by Staff.  The program will 
continue for a minimum of two years and will include distribution of an 
informational package to each applicant for new service, to customers following 
the disconnection of service, and to Community Action agencies located in the 
company’s service area.

  The package will include a Staff-approved letter that outlines specifically 
what services RECONEX provides, the obligation of RECONEX and of its customers, 
and an explanation of RECONEX’s billing and disconnection  policies and 
procedures.  In addition it will provide a document or brochure that includes 
the text of the Commission’s Rights and Responsibilities brochure to be printed 
at RECONEX’s expense.  Should  RECONEX fail to develop a customer education 
program approved by Staff by December 31, 1999, RECONEX will become liable for, 
and the Commission reserves the right to impose, the suspended penalties of 
$20,000.00.

 • RECONEX will spend a minimum of $121,000.00 for system and service 
improvements.  The $121,000.00 was established at 7% of RECONEX’s total system 
and service improvement costs as Washington customers constitute approximately 
7% of RECONEX’s total customer base.  Should RECONEX fail to spend a minimum of 
$121,000.00 for system and service improvements as approved by Staff, RECONEX 
will become liable for, and the Commission reserves the right to impose, the 
suspended penalties of $121,000.00. 

 • The Staff will conduct a Compliance Audit of fifty random customer accounts 
in September, 2000.  The benchmarks that the company must meet in order to be 
found in compliance are set forth in Table A of the Stipulation.  Should 
RECONEX fail to meet more than two benchmarks outlined in Table A, RECONEX will 
become liable for, and the Commission reserves the right to impose, the 
suspended penalties of $45,000.00.

 • Penalties for failure to meet the benchmarks set forth in Table A of the 
Stipulation and Settlement shall be assessed through the issuance of a 
Supplemental Order to Show Cause Why Penalties Should Not Be Assessed, which 
may be bought under this docket number and the parties shall retain any rights 
of appeal from such proceeding to which they would otherwise be entitled.

 • Staff and RECONEX will review RECONEX’s customer service handbook and 
RECONEX will make any necessary modifications to bring the language into 
compliance with Washington regulations no later than November 30, 1999.

 • RECONEX will complete transition of all Washington Ameritel accounts to 
RECONEX no later than December 31, 1999. 

 • The Stipulation does not preclude the Commission from initiating a new 
complaint based on Staff’s September 2000 audit findings or the findings of any 
future audit.

  Table A of the Stipulation and Settlement lists the specific actions required 
of RECONEX, and which RECONEX has committed to undertake, to remedy the claimed 
violations of Washington statutes, rules, and tariff provisions set forth in 
the Commission’s Complaint of July 23, 1999.  Additionally, it specifies the 
implementation date by which RECONEX will undertake each action and the 
benchmarks that RECONEX must meet at the time of the September 2000 audit. 

III. Commission Discussion and Decision
  
  It is the responsibility of the Commission to protect the consumer and 
further the public necessity and convenience by ensuring all entities over 
which it has jurisdiction comply with state law, Commission rules, and filed 
tariffs, if applicable. Respondent is subject to chapter 480-120 WAC and RCW 
80.36.130 and the terms of its filed tariff.  The Complaint alleges a 
continuing pattern of RECONEX’s noncompliance with Washington law, Commission 
rules, and its filed tariff that cannot be taken lightly.  Therefore, we focus 
on the question of whether RECONEX demonstrates an intention to take whatever 
steps are necessary to bring it into compliance with state law and Commission 
rules.  We find that it does. 
  
  RECONEX exhibits good faith in its efforts to cure past violations that gives 
credence to its stated determination to adhere to state law and Commission 
rules in the future.  The purpose of penalty assessments is to secure 
compliance with the law.  Where the company penalized comes forward and 
endeavors to take whatever steps are necessary to bring it into compliance, 
conditional mitigation by suspension is a means to both impress upon the 
company the importance of compliance and to ease the financial impact of the 
penalty which should further encourage, and perhaps better enable, the company 
to take all steps necessary to achieve full compliance in the near term. 

  Considering the underlying policy that penalty assessments should encourage 
compliance, the nature and circumstances of the uncontested violations, and 
RECONEX’s present attitude of good faith, supported by efforts to comply with 
the law, there appears to be a basis for imposing penalties on a conditional 
basis.

  Upon consideration of all the evidence of record, penalties will be imposed, 
on condition. 

  The Commission finds that the Stipulation would resolve all outstanding 
disputes raised by the Commission’s Complaint and is consistent with the public 
interest.  The Stipulation and Settlement Agreement should be accepted as a 
final resolution of the Complaint in this proceeding. 

FINDINGS OF FACT
  
  1.   The Washington Utilities and Transportation Commission is an agency of 
the State of Washington, vested by statute with authority to regulate rates, 
practices, accounts, and other matters pertinent to the operation of public 
service companies, including local exchange telecommunications companies.

  2.   1-800-RECONEX, Inc. engages in the business of providing prepaid local 
telecommunication services to customers in Washington State and is licensed to 
do so. 

  3.   On July 23, 1999, the Commission entered a Complaint, Order, and Notice 
of Prehearing Conference by which it alleged that 1-800-RECONEX, Inc. had 
violated state law, Commission rules, and the terms of its filed tariff.

  4.   On October 8, 1999, Staff and 1-800-RECONEX, Inc. filed a Stipulation 
and Settlement Agreement to resolve all outstanding issues in this proceeding.

CONCLUSIONS OF LAW

  1.   The Washington Utilities and Transportation Commission has jurisdiction 
over the subject matter and the parties.  Chapters 80.04 and 80.36 RCW.

  2.   The terms of the Stipulation and Settlement Agreement between Respondent 
and Staff are consistent with the public interest and result in customer 
service and billing practices that are in compliance with state law, Commission 
regulations, and Respondent’s filed tariff.

  3.   The Commission should adopt the terms of the Settlement, per the 
discussion in this Order, and impose those terms on the Respondent.   
ORDER 

  THE COMMISSION ORDERS:

  1.   The Complaint and Order issued July 23, 1999, is dismissed, contingent 
on Respondent’s compliance with the terms of this Order. 

  2.    Penalties of $186,000.00 are imposed on Respondent, on condition.  
  3.    Penalties of $20,000.00 are suspended, pending Respondent’s investment 
of a minimum of $20,000.00 to develop a Staff-approved, customer education 
program by December 31, 1999.  

  4.    Penalties of $121,000.00 are suspended, pending Respondent’s timely 
expenditure of a minimum of $121,000.00 for Staff-approved, system and service 
improvements by the date of the September, 2000 audit.  

  5.    Penalties of $45,000.00 are suspended, pending the outcome of a 
Compliance Audit of fifty random Respondent customer accounts to be conducted 
by Staff in September, 2000.

  6.    The Respondent will file a status report with Staff on the first of 
every month, specifying monies spent and actions completed with regard to its 
customer education program and system and service improvements, until excused 
from further reports by letter from the Commission.

  7.    Staff will conduct a Compliance Audit of fifty random Respondent 
customer accounts by September 30, 2000, and file a written report with the 
Commission within forty five days of completion of the audit with a detailed 
explanation of the results.  The report should include a recommendation as to 
whether the terms of this order are met and whether an order may be entered 
finding the conditions satisfied.
 
  8.    The Stipulation For Settlement and For Entry of An Agreed Final Order 
filed by Commission Staff and 1-800-RECONEX, Inc. on October 3, 1999, and 
appended to this Order as Attachment 1, is approved and adopted by reference 
and made a part of this Order as though fully set forth.

   9.   The procedural and hearing schedule set forth in the Prehearing 
Conference Order is canceled.

  10.   1-800-RECONEX, Inc.’s Motion For Conversion of Proceedings is denied.
  

  THE COMMISSION FURTHER ORDERS that jurisdiction is retained by the Commission 
to effectuate the provisions of this order.


  DATED at Olympia, Washington, and effective this         day of 
November, 1999.

  WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION



      MARILYN SHOWALTER, Chairwoman


      RICHARD HEMSTAD, Commissioner


      WILLIAM R. GILLIS, Commissioner


NOTICE TO ALL PARTIES:

This is a final order of the Commission.  In addition to judicial review, 
administrative relief may be available through a petition for consideration 
filed within 10 days of this order’s service date pursuant to RCW 34.05.470 and 
WAC 480-09-810, or a petition for rehearing pursuant to RCW 80.04.200 or RCW 
81.04.200 and WAC 480-09-820(1).