BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION, Complainant, v. U S WEST COMMUNICATIONS, INC., Respondent. DOCKET NO. UT-970766 ANSWER OF PUBLIC COUNSEL This answer is filed pursuant to the Commission order calling for answers to the petition of US West Communication Inc. (US West or Company). As requested, this answer is limited to the service quality and directory assistance issues. I. SERVICE QUALITY PROPOSAL Public Counsel understands the Company to seek a definitive answer from the Commission on the precise level of service quality performance US West must achieve, such that the Commission would allow the ROR to move to the midpoint of the allowable range, and allow the Company to recover the costs of its team and merit award incentive compensation program. We have a three-tiered response to US West’s request that reflects our understanding of the Commission’ s intent when it focused on service quality in the UT-950200 case, the Company’ s request, and the work involved to establish a meaningful performance benchmark. We recommend that the US West proposal be rejected and, if the Commission desires to set specific benchmarks, that a process be allowed for developing comprehensive service quality standards for US West. A. The Desirability of Establishing Service Quality Standards for Rate of Return or Incentive Compensation Recovery Public Counsel believes the Commission to have been explicit in both the 15th Supplemental Order to UT-950200 and the 10th Supplemental Order to UT-970766 regarding the level of performance it was seeking from US West. In both cases, the Commission pointed to performance equivalent to 1991 levels. It cited certain measures such as customer complaints and held orders as “illustrating trends.” UT-950200, Fifteenth Supplemental Order, p. 18. The Commission emphasized its desire to avoid micromanaging by focusing on results. This general standard should be sufficient to provide guidance to US West to increase service to historical levels. The Company apparently seeks further clarification based on the notion that “significant” and “substantial” improvement are likely to prove subjective enough to litigate. Public Counsel is concerned that the Company bear the full responsibility for its service quality performance, including exercising judgment about when that performance meets the needs of its customers. Should competition develop in markets the Company serves, it will be in need of such judgment lest it lose those customers who find their service inadequate. The Company is currently free to petition the Commission at any time for either rate of return basis points or recovery of the incentive compensation plan costs. While the Company appealed virtually every aspect of UT-950200 to the courts, it never sought any clarification on this issue. Thus, this Petition is many months late. Nor did the Company seek any clarification as a part of its case in UT-970766. It acknowledged in UT-970766 that service quality was not at the level it felt would merit ROR relief, but did not suggest nor ask what an adequate level of service might be. During the recent case no party recommended specific numerical standards. Now after the record is closed, the Company, via a petition for reconsideration, suggests specific standards which appear to have no basis in the record of this case. We concur with US West that new evidence should not be submitted by these pleadings and therefore move to strike all information contained in its pleadings that is not a part of the record. Given the Company’s stated urgent need for revenues, Public Counsel is concerned that the Company will view any additional clarification as a minimum threshold, upon which it would automatically recover the basis points and expenses associated with the incentive compensation plan. Such a view could lead the Company to remedy only the situations for which the Commission established criteria, to the detriment of other concerns. Such a view could further harm the Company’s desire for certainty, should the Commission properly find other legitimate reasons worthy of delaying recovery to US West on these issues. We suggest that it would be ill-advised for the Commission to establish specific standards without considering the broad range of possibilities. The general standard that total service quality be at 1991 levels is sufficient guidance for now. Creation of narrow standards, as urged by the Company, could easily miss new areas of problems such as trunk congestion. With these concerns, Public Counsel suggests the Commission stand by its order in the UT-950200 case, as repeated in the 1997 case, and not establish via these post hearing pleadings service performance standards specifically for allowing the Company to recover the rate of return basis points and incentive compensation costs linked to performance in UT-950200. B. The Process of Developing Service Quality Standards Public Counsel has consistently advocated for the development of a comprehensive service quality index, most recently in UT-970766. We do not find any inconsistency between that desire and the above argument, as a comprehensive solution could be applied not only to those specific issues but to the Company’s performance on an ongoing basis. Furthermore, the list of items that would be desirable in a comprehensive index are much broader than those proposed by the Company in its Petition. Public Counsel continues to support the development of a comprehensive service quality index, in cooperation with Staff, the Company and other interested parties. We suggest a reasonable time frame to be five months, giving all parties an adequate opportunity to understand the company’s current and historical performance and to discuss the optimal level of future performance and the appropriate measures of such. Public Counsel believes the development of this index would be mutually beneficial to the parties. The Company would receive the certainty about performance it seeks for the issues raised in its petition in a reasonable period of time. Should the Company desire to move to an AFOR agreement, the service quality index could be used as the basis for tracking and evaluating the Company’s performance during that agreement. Given the deterioration of service quality concerns in Washington during the last AFOR, and in Oregon under the most recently terminated AFOR, such an undertaking is crucial. C. The Technical Aspects of an SQI Public Counsel specifically did not propose a list of measures that might be included in a service quality index in UT-970766 because we simply did not have time to construct them. The weeks afforded between the Commission’s call for answers to US West’s petition and this filing was obviously not adequate for such a task. Instead, we propose the process described above to come to a mutually-agreeable set of measures and performance standards for those measures. The short list of items contained in the April 1996 Order as illustrations and in US West’s petition as standards is not sufficient for measuring or tracking the Company’s performance in total, although they are useful as a beginning point. A cursory examination of the Company’s current reporting requirements reveals a set of data that could conceivably be used in the construction of an SQI. However, Public Counsel believes that other items, such as billing and disconnection practices, call handling and order tracking, might also be pertinent. To that end, and with the recognition of the Company’s desire for a timely response, Public Counsel has initiated an investigation of the elements of an SQI that we would find essential, so that if the Commission determines such a process is appropriate, we will be able to participate fully. We understand that the Company has committed to provide us data necessary for this task, where it is not already available from the last two rate cases. We are concerned with some of the specific proposals the Company suggests in its petition for clarification, most notably that relating to the measurement of complaints. The Company intends to institute an internal complaint function, as suggested by the Commission. This will mitigate ratepayer complaints from the Commission to the Company. We understand the Company to contend that complaints received by the Commission remains the appropriate standard to measure. This is ridiculous. Complaints are measured to gauge the level of ratepayer dissatisfaction, not just the extent that dissatisfaction is expressed to the Commission. We urge the Commission to confirm that any attempt to set appropriate levels of performance should compare like quantities over time, for instance by including complaints both internal and external to the Company. Another technical problem with the specific standards recommended by the Company is the mismatch in using a ratio of held orders to total orders. Total orders, as calculated by the Company, apparently include not just primary new and transfer line orders, but also additional lines, disconnects and vertical services. The vast majority of orders are for vertical services and disconnects. Comparing primary line held orders to total orders appears to not be a meaningful measure. Even total line held orders compared to total orders is not meaningful. The measures recommended by the Company are for its total Washington system. Development of comprehensive standards should consider whether to use geographically disaggregated standards as well, to assure that service in each exchange or central office is adequate. The Company’s Petition makes no mention of the various service quality standards maintained by the Company. For instance, some measures are used in the Company’s bonus program. It would be useful to know the universe of standards currently measured by the Company. II. DIRECTORY ASSISTANCE It is unclear exactly what the Company is asking. It appears to be seeking a true-up mechanism for DA, similar to the ECAC and PRAM of Puget Power. The request should be rejected. The Company appears to persist in its unique notion that it is guaranteed to achieve its authorized revenues. It is not. The parties and Commission relied upon the best data available as provided by US West itself. The Company’s request touches on retroactive ratemaking and single issue ratemaking. If its theory were accepted, any party should be free to reopen a case to show that a particular measure of demand units turned out to be different than expected and to adjust rates accordingly. This is not consistent with sound regulatory practice. DATED this 19th day of February 1998. CHRISTINE O. GREGOIRE Attorney General Robert F. Manifold Assistant Attorney General Public Counsel Section