Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS? A. My name is Theresa Jensen and my business address is U S WEST Communications, Inc. (U S WEST or Company) 1600 7th Avenue, Room 3011, Seattle, Washington 98191. Q. BY WHOM ARE YOU EMPLOYED AND IN WHAT CAPACITY? A. I am employed by U S WEST Communications, Inc. as the Director of Regulatory Affairs for the State of Washington. Q. HOW LONG HAVE YOU BEEN EMPLOYED BY U S WEST COMMUNICATIONS, INC. OR ITS PREDECESSORS? A. I have been employed by U S WEST Communications, Inc. or its predecessors since 1972 and in my current assignment since 1991. Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY? A. The purpose of my testimony is to introduce U S WEST’s Rate Case and to provide the reasons U S WEST is asking the Washington Utilities and Transportation Commission (Commission) to recognize a $70.3 million increased revenue requirement. I briefly describe the revenue requirement of the Company and the rates proposed to recover it. I explain how the revenue requirement was calculated and the relationship of this proceeding with the pending State Supreme Court Case concerning U S WEST’s appeal of the Commission Order in Docket No. UT-950200. I also address how the proposed rate increases do not conflict with pending rate reductions stayed by the Court. Finally I discuss the nearly six month audit process conducted by the Commission staff which led to the staff’s concurrence in this filing. Q. WHY IS THE COMPANY FILING TO INCREASE REVENUE NOW? A. U S WEST is requesting increased revenues for several reasons. First, the Company’s Washington earnings have continued to deteriorate and new revenues are needed to bring earnings to the last Commission prescribed authorized rate of return, established in 1996. The authorized rate of return is 9.37%, the nations second lowest. However U S WEST’s actual 1996 earnings on a Commission basis were only 6.45% Second, new depreciation lives were authorized by the Commission on August 15, 1997 which resulted in an increase to U S WEST’s revenue requirement of $36 million. Third, the rate revisions ordered by the Commission in Docket No. UT-950200 no longer result in a net revenue reduction of $91.5 million; the 1996 net revenue reduction is $96.7 million. This change is due to the fact that the actual number of product units in service during 1996 differed from that which was used in the test year for the Company’s last rate case (November, 1993 - October, 1994). Fourth, the competitive environment continues to erode U S WEST revenues, decreasing implicit subsidies previously available to contribute to low residential basic service rates. Lastly, the Company cannot continue to invest in this state as it has in prior years unless regulated prices, earnings and capital recovery (depreciation) improve to levels which are more comparable to those provided for in other U S WEST states. U S WEST wants to play a role in building a leading edge telecommunications infrastructure in Washington state. We want to offer the best possible service for the next century. However, to do that requires resources. This filing is a significant step in allowing the company to obtain those revenues so that we may do our job for Washington state and the people who live here. II. REVENUE REQUIREMENT Q. WHAT IS THE COMPANY’S 1996 EARNINGS LEVEL, AND HOW MUCH NEW REVENUE IS NEEDED TO BRING EARNINGS UP TO THE CURRENT U S WEST AUTHORIZED RATE OF RETURN? A. The Company’s earnings level on a Commission basis in 1996 is 6.45%. This earnings level includes the Commission adjustments ordered in Docket No. UT-950200. The Company is earning 5.54% on an unadjusted basis. The revenue requirement necessary to bring the company’s earnings up to the current authorized rate of return of 9.367% is $70.3 million. The Company is not requesting the full Commission authorized rate of return of 9.627% at this time. When U S WEST Commission complaints are further reduced, the Company will seek additional earnings relief. Significant progress has been made in this area; U S WEST Commission complaints in Washington are down by 58% since end-of-year 1995. See Exhibit TAJ-1. Q. WHAT ARE THE MAJOR COMPONENTS OF THE REVENUE REQUIREMENT? A. The major components of the Company’s revenue requirement are as follows: 1Capital recovery of $36 million 1Removal of the Team and Merit Award Adjustment In Docket No. UT-950200 of $10 million 1Revenues grew more slowly than expenses and taxes by $24.3 million Q. YOU INDICATE THAT THE COMPANY’S EARNINGS HAVE DETERIORATED SINCE THE LAST RATE CASE, COULD YOU EXPLAIN THE CAUSE? A. Yes. In Docket No. UT-950200, the test period was from November 1993 through October 1994; the rate case itself was filed February, 1995 and the order was issued in April, 1996. The revenue requirement addressed in this filing is based on an end-of-year 1996 test period and assumes all rate revisions ordered by the Commission have been implemented. During that two years, U S WEST has lost $7.4 million in toll revenues. In addition, the revenue effect of the Commission’s Order in Docket No. UT-950200 is now valued at ($96.7 million) which means the Commission ordered rate changes in our last rate case would have resulted in the Company reducing revenues by $96.7 million rather than the $91.5 million which the Commission intended. Q. WHAT IS THE KEY FACTOR DRIVING THE $24 MILLION REVENUE REQUIREMENT COMPONENT? A. There are many increases and decreases that make up the $24M revenue requirement increase; however the primary factor that increases the revenue requirement is the irregular growth in revenues, expenses, and taxes. Revenues have grown at only 4.1% annually since the 1994 test year in Docket No. UT-950200. Expenses and taxes have increased by 6.5%, while the rate base is almost the same year over year. Q. WHY HAVE WASHINGTON REVENUES GROWN AT ONLY 4.1% ANNUALLY SINCE THE 1994 TEST YEAR IN DOCKET NO. UT-950200? A. Toll and Business Basic Exchange Service competition is effecting revenue growth. The average revenue per access line has decreased from $61.24 in 1991 to $56.87 in 1996. This is largely due to a decrease in intrastate toll revenue of over $135 million since 1991. Q. WHAT HAS THE COMPANY DONE TO IMPROVE ITS EARNINGS IN ADDITION TO ITS REQUEST FOR INCREASED RATES? A. To improve earnings the company has introduced a number of new services and has offered a number of promotions to increase revenues from discretionary services, such as central office features. The impact from growth in revenue from central office features is twice that of recurring residence and business local service. Washington penetration levels for discretionary services such as Call Waiting, Three-Way Calling, Speed Calling, etc. are among the highest in the industry. However, these efforts have not offset larger losses in Toll and Business Basic Exchange Service revenues, where the competitors concentrate their efforts. Q. WHY HAVE WASHINGTON EXPENSES AND TAXES INCREASED BY 6.5%, ANNUALLY SINCE THE 1994 TEST YEAR IN DOCKET NO. UT-950200? A. Total expense has grown for the following reasons: 1Continued emphasis in providing quality service in the basic network by adding personnel. 1Significant additional investment has increased depreciation expense. U S WEST has invested over $1 billion in Washington over the last three years. Q. WHY CAN’T THE COMPANY RECOVER THE FULL AMOUNT OF ITS REVENUE REQUIREMENT WITH CURRENT RATES? A. The Company will continue to experience a decline in toll revenues and in revenue per access line because of increasing competition. The Company will not be able to offset such losses with ever increasing feature and adjunct service sales. Competitors currently bundle features with their basic exchange service under one rate, and as these competitors expand their markets U S WEST will increasingly be unable to retain this revenue source. Additionally, wholesale rates for resold services or unbundled network elements may be set by the Commission at levels dramatically lower than current retail rates. If this is done, U S WEST will continue to see expenses increase while revenues erode at a sharply accelerated rate. Q. HOW DOES THIS FILING RELATE TO THE PENDING STATE SUPREME COURT CASE? A. This filing has no effect on that case. We continue that appeal and look forward to a State Supreme Court ruling on the merits. For this case, the Company calculated every adjustment ordered in Docket No. UT-950200 on a 1996 test year basis, and applied such adjustments to the end-of-year results. This results in a revenue requirement of $70.3 million. Exhibit TAJ-2 itemizes each adjustment made. As previously stated, sixty-five percent of the new revenue requirement is due to the newly authorized increased depreciation expense and the recognition of 1996 Company team and merit awards. The remaining thirty-five percent is due to decreased revenues and increased expenses. Should the State Supreme Court uphold the Commission’s Order in Docket No. UT-950200, the additional revenue requirement of $70.3 million would not change. Should the State Supreme Court reverse the Commission Order or remand that Order to the Commission for further consideration of any issue, the revenue requirement may increase beyond the $70.3 million. Q. IN ADDITION TO THE RECOGNITION OF THE COMMISSION ORDERED ADJUSTMENTS IN DOCKET NO. UT-950200, DID THE COMPANY OR THE COMMISSION STAFF ALSO INCLUDE NEW ADJUSTMENTS? A. Yes. The Company initially presented this case on an informal basis to the Commission staff on April 18, 1997. The informal process resulted in a complete review of not only the UT-950200 adjustments on a 1996 basis, but also included a review of any out-of-period financial entries, 1995 and 1996 year-end accruals and monthly revenue and expense variances. Q. YOU STATED THE RATE REVISIONS ORDERED BY THE COMMISSION IN DOCKET NO. UT-950200 NO LONGER RESULT IN A NET REVENUE REDUCTION OF $91.5 MILLION AND THAT THE 1996 NET REVENUE REDUCTION IS NOW $96.7 MILLION. CAN YOU EXPLAIN WHAT HAS OCCURRED TO CAUSE THIS CHANGE? A. Yes. The Commission Order in Docket No. UT-950200, was intended to result in a net revenue reduction of $91.5 million. The order included $106,462,385 of required rate reductions and $14,951,385 of new revenue associated with rate increases, for a net result of ($91,511,000). However, the revenue calculations were based on October, 1994 test year units. Had the Commission order been implemented in totality in May, 1996, the actual 1996 revenue implications, given the actual units of each service category at that time, were as follows: $103,493,726 in rate reductions and $6.8 million in rate increases, for a net revenue result of ($96,659,627). Exhibit TAJ-3 illustrates how the revenue calculation differed after two years of market activity. The primary drivers of this change were decreased Directory Assistance calls, Message Toll Service minutes and Analog Private Lines and increased Switched Access minutes, Digital Switched Service access lines and Centrex Network Access Register lines. Q. THE STATE SUPERIOR COURT ALLOWED THE COMMISSION ORDERED RATE INCREASES IN DOCKET NO. UT-950200 TO GO INTO EFFECT IN 1996; HOW MUCH NEW REVENUE DID THESE INCREASES ACTUALLY PROVIDE? A. In May, 1996, the King County Superior Court approved the rate revisions and increases associated with Residence Basic Exchange rates, Dedicated/Private Line service rates and Directory Assistance rates. The Private Line rate increases were valued at $7,169,000 at the conclusion of a three year phased-in schedule. The residence basic exchange rate increase was for Measured Service only and was valued at $385,000. The Directory Assistance increase was valued at $7,782,000. The net value of the rate increases at the conclusion of 1999 (the end of the three year phase-in period) was estimated to be $14,951,385. However, the rate increases approved by the Commission and implemented in May, 1996, improved 1996 annual earnings by only $6.8 million. Q. WHY WERE THE COMMISSION APPROVED INCREASES ONLY WORTH $6.8 MILLION INSTEAD OF $14.95 MILLION? A. The change in revenue occurred due to changes in demand which decreased the estimated revenue effect of approved increases. First, when the Directory Assistance calculation was made U S WEST provided Directory Assistance for most IntraLATA calls. However, U S WEST Directory Assistance calls have decreased by 26% since 1994. This is primarily due to the introduction of the 360 area code in 1995. This required numbering plan change resulted in the routing of inter area code Directory Assistance Calls (206 to 360) to Interexchange Carriers, reducing the number of calls directed to U S WEST. Therefore the rate increase resulted in $3.3 million of new revenue not $7.8 million as originally calculated. Second, the Analog Private Line and Terminal Loop service rate increase was to be phased-in over a three year period. Year one of the three year phase-in was estimated at $3.5 million; the subsequent year rate increases were worth an additional $3.7 million in Terminal Loop service revenue. However, the Commission Order in Docket No. UT-950200 offset the second and third year Terminal Loop service rate increases with a Switched Access Service rate reduction for a revenue neutral effect. Therefore the increase to revenues resulting from the King County Superior Court ruling, resulted in $3.5 million of new revenue rather than $7.2 million. Third, the Superior Court also approved a reduction of $2 million for Digital Private Line and DS-1 (high capacity) service rates included in the Commission’ s Order. Fourth, the Residence rate increases to achieve a statewide uniform rate were directed to be phased-in over two years, if the increase resulted in a rate change of more than $1.00. This requirement actually caused a reduction in Residence Basic Exchange Service revenues for the first year of the phase-in. In summary, the rate increased approved by the Commission, effective as of May, 1996 resulted in increased 1996 annual revenues of $6.8 million. Q. WHY DIDN’T U S WEST WAIT TO FILE THIS REQUEST TO INCREASE REVENUES UNTIL THE COURT OPINION IS ISSUED? A. U S WEST cannot afford to delay its request for rate relief until a court decision is issued. U S WEST is facing an unprecedented growth in demand for basic telephony services coupled with a huge new demand for high speed, long call duration data services related primarily to internet usage. U S WEST must have additional revenues in order to make the investment to meet that demand. The court decision may not be forthcoming for sometime and in any event it will not decrease the $70.3 million additional revenue requirement; it may only increase the requirement. Should the State Supreme Court action result in an increased revenue requirement, U S WEST will work with the Commission to determine how best to implement such a change and will attempt to implement any further immediate increase on services not included in this rate proposal. Q. WHY DID THE COMPANY SETTLE THE DEPRECIATION CASE IN DOCKET NO. UT-951425? A. The Company agreed to the settlement in Docket No. UT-951425 because the informal rate case review process was close to completion and it appeared possible to avoid raising customer rates twice in quick succession by combining the depreciation increase of $36 million with the increases resulting from the WUTC staff review which has been underway since last March. This filing represents an agreed to resolution of both dockets in such a way that customer rates are only affected one time, and is the best course for U S WEST to obtain timely relief for its increased revenue needs. III. RATE DESIGN Q. WHAT IS THE COMPANY’S RATE PROPOSAL TO INCREASE REVENUE BY $70.3 MILLION? A. U S WEST proposes to increase residence basic exchange rates by $3.00 a month or to a statewide average rate of $13.50. The national average residence rate is nearly $17.00. A monthly rate of $13.50 is less than the rate paid by U S WEST residence customers in the State of Washington ten years ago, in 1987, and is less than the statewide average rate charged by several other Local Exchange Companies in this state. See Exhibit TAJ-4. U S WEST also proposes to increase residence measured service by $1.85 a month or to a statewide average rate of $9.20. The increased rates are $53.8 million in increased revenues. Additionally, the Company plans to increase business Basic Exchange, Centrex Network Access Register and Digital Switched Service rates by $2.00. This increase will be applied to business rates which result from the Supreme Court appeal of the Commission’s rate Order in Docket No. UT-950200 and will be accrued for but not charged until the Supreme Court Order. In any case, the resulting business rate will be no less than $27.00 a month per line, twice as high as the $13.50 residence rate, in keeping with the guidelines for the relationship of business rates to residential rates set by the Commission in the last rate case. U S WEST will not implement this increase until the State Supreme Court rules on the pending court appeal. A $2.00 increase is $12 million. Directory Assistance rates will be increased from $ .35 to $ .60; the two free call allowance will remain. Q. WHAT OTHER RATE DECREASES WERE STAYED BY THE STATE SUPREME COURT? A. Switched Access, Hunting and Toll rate reductions were stayed by the State Supreme Court pending its final order on the merits. Q. HOW DOES THE COMPANY PLAN TO ADDRESS THE $12 MILLION REVENUE REQUIREMENT RECOVERED THROUGH AN INCREASE IN BUSINESS BASIC EXCHANGE RATES INCLUDED IN THIS RATE PROPOSAL? A. The Company proposes to make an accounting adjustment reflective of this rate increase each month. Once the court order is issued, the Company will implement a Business Basic Exchange Rate of $27.00 instead of the $25.00 rate originally ordered by the Commission, if the revenue reduction remains as ordered. The adjustment will reduce any potential liability associated with the Business Basic Exchange Service rate reduction stayed by the Court by $2.00 per month per Business access line plus interest effective with the date of the Commission Order in this Docket. The Company will apply the interest rate ultimately determined by the court as the appropriate rate for the stayed portion of the Commission’s Order in Docket No. UT-950200. The Company proposal includes an accrual of interest on the $12 million for the Company, which will ultimately be deducted from any potential ratepayer refund which may be determined at the conclusion of the Court proceeding in No. 64822-1. The interest rate will mirror the rate determined by the Court for any ratepayer refund. Q. WHY DID THE COMPANY CHOOSE TO EXCLUDE A CARRIER SWITCHED ACCESS RATE INCREASE? A. An increase in Carrier Switched Access rates would simply not result in additional revenues because of the arbitrage which would result between intrastate and interstate access services. The Federal Communications Commission (FCC) has recently reduced interstate switched access by 9%. Washington intrastate Switched Access charges of $ .042623 per minute are already among the highest in the country and are more than twice the interstate switched access rate. If the Company attempted to recover a portion of the revenue requirement from Switched Access charges, it would never attain the estimated revenue. Carriers will simply purchase interstate switched access service priced at lower rates. The Company will have to mirror interstate rates in its intrastate tariff or revenues will shift to the interstate arena, or drive the business to switched access competitors. Q. WHY DID THE COMPANY CHOOSE TO EXCLUDE A PRIVATE LINE/SPECIAL ACCESS RATE INCREASE? A. Private Line/Special Access rates will be reviewed by the Commission in the pricing phase of Docket No. UT-960369 later this year. The Network Access Channel is an unbundled loop by another name and should be priced at the same rate. It would be most appropriate to address Private Line/Special Access Rates once wholesale rates are established. Furthermore, Terminal Loop customers are currently in the second year of the three year phase-in to Private Line rates. A further rate change at this time could cause needless customer confusion. Q. WHY DID THE COMPANY CHOOSE TO EXCLUDE CUSTOM CALLING RATE INCREASES? A. As previously stated, Alternative Local Exchange Companies do not typically separately charge for custom calling features, nor do many resellers. See Exhibit TAJ-5. If U S WEST were to increase rates for custom calling services it is unlikely that it would gain any revenue from those increasing number of customers who have a choice of alternative providers. Such a price increase is very likely to stimulate competitive losses creating a greater ultimate burden on customers who do not yet have a choice of alternative providers. Q. WHY DOES THE COMPANY PROPOSE A $3.00 INCREASE TO RESIDENCE BASIC EXCHANGE RATES? A. U S WEST Washington Residence Basic Exchange rates are currently the lowest rates in the country as compared to other Regional Bell Operating Companies or major Independent Local Exchange Companies. Current rates provide strong disincentives to competitive entry. Nor do they reflect inflationary costs incurred over the last ten years. U S WEST’s proposal to increase rates to $13.50, is still less than what customers paid for a residence touchtone flat rate line in 1987 - $13.75. Residence Basic Exchange Service rates need to increase for the following reasons: 1Rates increases instead to other services are not sustainable and will ultimately require continued and even greater residential rate increases in the near future. 1Competition will never occur on a mass market basis if residence rates remain almost the lowest in the nation and far below any reasonably measured level of actual cost. 1Washington earnings will continue to deteriorate, jeopardizing network modernization and integrity, generating the need for annual rate case activity and continued rate of return regulation. Competition has ended the viability of pricing practices designed in a monopoly era. Services artificially priced well above cost have been targeted by competitors and U S WEST market share has markedly declined in the overpriced markets targeted by competitors. Alternative providers have sold over 30,788 business access lines in greater Seattle. Typically, the competitors have sold to business customers who pay $38.10 per access line. Not only do the competitors gain the revenue associated with such lines but they also obtain discretionary service and toll revenues. See TAJ-6 for examples of competitive tactics utilized by competitors. The true indicator of which services are priced above cost is to look at where competitors enter. Competitors target toll, urban business and discretionary services because that is where the profits are. If residence rates in Washington were, for example, at the levels of New York City, we would see residential competition in Seattle by now, as New York has. Discretionary service prices that in turn provided reduced rates for residential basic services are no longer sustainable. Unless basic service prices more adequately reflect the cost of the service, competitors will continue to arbitrage unsustainable prices in the highly profitable markets. This will further and artificially reduce earnings and U S WEST will be forced to file rate cases on a regular basis. Future rate increases will be recovered from those customers undesired by other carriers who then will have no choice but to purchase service from U S WEST. The Commission and the Company have an opportunity to accelerate the transition to a competitive residence market place and at the same time minimize the impact on customers not targeted by alternative providers. A residence rate increase of $3.00 now may mitigate the need for future residence rate increases and enable the Company to pursue alternative regulation approaches such as a price cap plan. U S WEST would like to pursue a price cap plan with the Commission for retail services. Such a plan could include price caps or stringent price constraints on residence and other non-discretionary services for a specified period of time. Therefore it is critical that Residence Basic Exchange Service rates be increased to a rate more in line with the national average. More importantly, the Company and the Commission will need to bring residence rates to a level more in line with the national average rate, if they hope to see competitive entry in the Washington residence market place. Competitors will enter those markets that offer the greatest profitability to them. If Washington residence rates continue to be among the lowest in the country, competitors will enter other markets and states long before they consider Washington. This is already evidenced by the competitive activity present today; which is focused primarily, if not exclusively, on business customers. Q. HOW WILL WASHINGTON RESIDENCE RATES COMPARE TO THE NATIONAL AVERAGE RATE IF THE $3.00 INCREASE IS APPROVED? A. Washington residence rates will still be 21% less than the national average rate of $17.00. As previously stated, they will also be 2% below their level in Washington state ten years ago in 1987. Q. HOW DOES THE PROPOSED RESIDENCE RATE COMPARE WITH THE BUSINESS BASIC EXCHANGE RATE? A. As previously stated, there will be a minimum relationship of two-to-one, where the Residence Basic Exchange service rate of $13.50 will be one-half of the Business Basic Exchange service rate of $27.00. Q. WHAT EFFECT WILL U S WEST’S PROPOSED RESIDENCE RATE INCREASE HAVE ON WASHINGTON TELEPHONE ASSISTANCE (WTAP) CUSTOMERS? A. The Company will not apply the $3.00 increase to WTAP customers Residence Basic Exchange service. Q. WHY IS THE COMPANY PROPOSING AN INCREASE TO DIRECTORY ASSISTANCE RATES? A. Directory Assistance rates still do not recover total cost. An increase of $ .25 per call, from $ .35 to $ .60, will contribute to the recovery of direct and allocated costs. The rate charged by other local service providers and interexchange carriers is generally over $1.00 and does not include a free call allowance. Q. WHAT OTHER COMMISSION DOCKETS RELATE TO THIS RATE CASE FILING? A. As previously stated, Docket No. UT-960369 will establish wholesale rates for unbundled network elements and for resold services. Once such rates are set, all U S WEST rates should be reviewed and possibly revised. Additionally, further FCC activity concerning Switched Access rates must also be factored into U S WEST’s overall revenue requirement. IV. SERVICE RESULTS Q. EARLIER YOU STATED THAT $10 MILLION OF THE REVENUE REQUIREMENT IS DUE TO RECOGNITION OF 1996 COMPANY TEAM AND MERIT AWARDS. HAS THE COMPANY COMPLIED WITH THE COMMISSION REQUIREMENTS IN DOCKET NO. UT-950200? A. Yes. In the Fifteenth Supplemental Order in Docket No. UT-950200, at page 131, the Commission found that the Company’s team bonus awards and merit payments were unacceptable because they were tied to standards putting a primary emphasis on the Company’ s financial performance. The Company has demonstrated to the Commission staff that the 1996 and 1997 team bonus and merit standards for payment of the awards meet Commission requirements that require greater emphasis on customer service. The Company has also demonstrated a showing of substantially improved, stable customer service performance. Q. HOW HAS THE COMPANY MODIFIED THE TEAM BONUS AWARDS AND MERIT PAYMENTS PROGRAM? A. In 1994, the U S WEST Communications, Inc. (USWC) Team Performance Award Components were as follows: 1 25% USWC Net Income 1 20% USWC Customer Service 1 30% USWC Corporate Quality Indicators 1 25% Business Unit Results The team bonus awards and merit payments program was modified in 1996 and 1997. The plan was renamed and now addresses both USWC financial and service results. It is weighted as follows: 1 30% USWC Net Income 1 30% Net Cash Flow 1 40% USWC Customer Service - 10% Access Intervals - 10% Held Orders and Backlog - 10% Percent Commitments Met - 10% Repair Cycle Time and Repair Intervals Met A business unit can use the above plan as the sole basis for determining their specific units Team Performance Award or it may establish specific, measurable objectives to identify their own level of contribution and success. If a business unit sets its own objectives, the final business unit result determines the total payout for the business unit. Q. CAN THE COMPANY DEMONSTRATE SUBSTANTIALLY IMPROVED, STABLE CUSTOMER SERVICE PERFORMANCE? A. Yes. Confidential Exhibit TAJ-6 provides service results for 1995, 1996 and 1997 year-to-date. The reports demonstrate the following improvements: 1An increase of 11 % in the number of out-of-service trouble tickets repaired in less than 48 hours; from 82.9% in 1995 to 94.08% in 1997. 1An decrease of 57% in the repair cycle time; from 38.31 hours in June, 1995 to 16.54 hours in June, 1997. 1An increase of 1% in the number of service orders completed by the assigned due date; from 97.5% in 1995 to 98.3% in 1997. 1A reduction of 58% in the number of Commission complaints filed by U S WEST customers. Q. WHY HAS THE COMPANY NOT REQUESTED THE FULL 9.627% ALLOWED RATE OF RETURN? A. The Company has decided not to pursue the 9.627% rate of return at this time because the number of U S WEST Commission complaints is not yet at the 1990 level as required by the Commission Order in Docket No. UT-950200. V. CONCLUSION Q. WOULD YOU SUMMARIZE THE COMPANY’S PROPOSAL FOR RECOVERY OF THE $70.3 MILLION IN NEW REVENUE REQUIREMENT? A. Yes. The Company requests the Commission approve its request for the following rate changes: 1A $3.00 Residence Basic Exchange Service rate increase, for a new rate of $13.50. 1A $ .25 Directory Assistance rate increase, for a new rate of $ .60. The Company also requests the Commission approve a Business Basic Exchange Service increase of $2.00, to be implemented upon conclusion of the pending State Supreme Court proceeding in Case No. 64822-1. Commission approval of the rate increase includes the calculation of interest owed to the Company on the $12 million, upon conclusion of the court proceeding. The interest will be deducted from any interest determined to be owed by the Company to rate payers. Q. DOES THIS CONCLUDE YOUR TESTIMONY? A. Yes. EXHIBITS Exhibit No. Exhibit TAJ-1 U S WEST Washingt