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Telecom Public Notice
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Ottawa, 19 October 1992
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Telecom Public Notice CRTC 92-64
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THE NEW BRUNSWICK TELEPHONE COMPANY LIMITED - INCENTIVE REGULATION
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I BACKGROUND
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In Telecom Public Notice CRTC 92-42, 24 July 1992 (Public Notice 92-42), the Commission initiated a proceeding to consider issues related to a fair and reasonable rate of return on average common equity (ROE) and an appropriate ROE range for the New Brunswick Telephone Company Limited (NBTel) for 1993. The Commission stated in that Public Notice that the proceeding would focus only on these issues, and not on the company's revenue requirement for 1993.
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On 8 September 1992, NBTel filed evidence pursuant to Public Notice 92-42. However, NBTel's evidence addressed not only issues related to a fair and reasonable ROE for 1993, but also issues related to a proposal for incentive regulation of the company. Specifically, NBTel proposed that the Commission establish a wider range for the allowed rate of return than has been its traditional practice, with the upper limit set above what would otherwise be the maximum. The company also proposed that the Commission adopt a mechanism that would allow for the sharing between customers and shareholders of earnings in excess of this wider range, with earnings above the allowed rate of return held in an account and distributed in the following year.
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In a letter to NBTel dated 21 September 1992, the Commission found that NBTel's proposal for incentive regulation contained insufficient detail to be considered pursuant to the expedited procedures established in Public Notice 92-42. Accordingly, the Commission stated that it would review the proposal in a separate proceeding. Consistent with its letter of 21 September, the Commission initiates a proceeding to address issues related to the possible introduction of a form of incentive regulation for NBTel.
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II ISSUES
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NBTel's evidence of 8 September 1992 will form part of the record of this proceeding. In addition, NBTel is to file supplemental evidence providing the following information, as well as any other information the company considers relevant:
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(1) further details clarifying its proposal that address the following issues: (a) whether its ROE range should be expanded downwards as well as upwards; (b) whether there should be a maximum ROE beyond which rate reductions would be triggered automatically; (c) whether, consistent with approaches taken in the United States, there should be rate reductions coincident with the implementation of incentive regulation; and (d) the conditions that would lead to a re-assessment of the ROE range and the ROE used to set rates;
(2) a description of the risks and rewards, the economic costs and benefits and the incentives that would arise under the company's proposal, that do not exist under the current regulatory regime;
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(3) measures, if any, that could be used under the proposed incentive regulation to evaluate annual productivity improvements and the appropriate role of these measures;
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(4) in addition to (3) above, (a) whether productivity or other targets (for example, targets for quality of service) should be set and, if so, (b) a description of those targets, (c) how the levels of those targets should be determined and what those levels should be, and (d) what action should be taken if they are not achieved;
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(5) whether factors other than increased efficiency or productivity resulting in changes to the company's ROE (for example, accounting changes) should be taken into account and, if so, how;
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(6) relevant legal considerations concerning the company's proposed sharing mechanism, including the potential for retrospective or retroactive rate-making given the company's proposal that earnings above the allowed rate of return be distributed in the following year; and
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(7) if incentive regulation is adopted for NBTel, whether the Commission should continue to monitor the company's financial statements, revenues, expenses and capital investment in the current manner, and, if not, what modifications to the current monitoring process would be appropriate.
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III PROCEDURE
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1. The mailing addresses to be used in connection with this proceeding are:
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Mr. Allan Darling
Secretary General
CRTC
Ottawa, Ontario
K1A 0N2
Fax: (819) 953-0795
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Mr. J. Paul O'Hara
Manager
Pricing and Regulatory Matters
The New Brunswick Telephone Company Limited
One Brunswick Square (BS19)
P.O. Box 1430
Saint John, New Brunswick
E2L 4K2
Fax: (506) 694-2473
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2. Persons wishing to participate in this proceeding (interveners) must file a notice of intention to participate with the Commission, serving a copy on NBTel, by 13 November 1992. Within one week of receiving such notice from anyone not a party to the proceeding initiated by Public Notice 92-42, the company is to serve a copy of its 8 September evidence on the party in question.
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Interveners are to indicate in their notices of intention to participate whether they plan to file evidence in this proceeding (pursuant to paragraph 3). The Commission will issue a complete list of parties and their mailing addresses.
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3. The Commission has addressed interrogatories to NBTel by letter dated 19 October 1992. NBTel is to file responses to these interrogatories, serving copies on interveners, by 30 November 1992.
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NBTel's supplemental evidence and interveners' evidence must also be filed with the Commission and served on all parties by 30 November 1992.
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4. Parties may address interrogatories to NBTel and to interveners who have filed evidence. Any such interrogatories are to be filed with the Commission and served on the party in question by 18 December 1992.
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5. NBTel and interveners to whom interrogatories have been addressed are to file responses with the Commission, serving copies on all parties, by 22 January 1993.
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6. NBTel is to file argument with the Commission, serving copies on all interveners, by 8 February 1993.
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7. Interveners may file argument with the Commission, serving a copy on NBTel, by 22 February 1993.
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8. NBTel is to file reply argument with the Commission, serving copies on all interveners, by 1 March 1993.
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9. Where a document is to be filed or served by a specific date, the document must be actually received, not merely mailed, by that date.
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Allan J. Darling
Secretary General
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