MPUC Upholds Requirement for Rebates to Customers from FairPoint
November 9, 2010
Augusta, Maine—Today the Maine Public Utilities Commission declined FairPoint Communications’ request to be relieved of the multiplier mechanism which is used to calculate the rebate owed to customers on account of service quality that fails to meet established benchmarks over two or more consecutive years. These rebate provisions were agreed to by FairPoint, and ordered by the Commission, in 2008 as part of both the case in which the Commission approved FairPoint’s purchase of the former Verizon network, and, the case which established FairPoint’s rates for telephone service. Maine ratepayers will receive $9,125,984 in bill credits over the course of the twelve months beginning next month, December 2010. Had the company’s request been approved, ratepayer credits would have been reduced to $4,562,922.
“While we commend FairPoint for its recent service quality improvements which we hope are a signal for the future, we reject the request for relief of service quality payments for failures in previous years,” stated Commission Chair Jack Cashman. “FairPoint may not have anticipated the problems of their ‘cutover’ from the old Verizon system to their own network in February 2009, however, they agreed to the service quality rate reduction formula including the multiplier. In addition, the company’s management is responsible for the actual service quality problems endured for the last two years by FairPoint customers who deserve to receive the rebates as required.”
In a related case decided today, the Commission agreed to spread the remaining rebate payments attributable to service quality metrics not met during the 2008-2009 year so that they are paid out over the same twelve month period beginning next month (December). As a result of this adjustment, the rebate payments will end concurrently and will appear as a single line item on customers’ bills, beginning next month. [See Docket 2009-328.]
Background: FairPoint (and Verizon before it) operate under an Alternative Form of Regulation (AFOR). The purpose of an AFOR is to provide incentives for company efficiency savings since any savings above the predicted rate can be passed on to consumers and shareholders. FairPoint’s AFOR includes a service quality index which is intended to ensure that its service does not deteriorate under this rate plan. The service quality rebate mechanism is triggered if FairPoint’s performance falls below established baselines for any of several separate service quality indicators. In 2008-2009, FairPoint missed 12 of 24 service quality metrics which resulted in over an $8 million rebate to customers which—after three separate Commission orders and a negotiated settlement at bankruptcy court—the Company began paying in March 2010 and is still in the process of paying.
For more information, visit the Commission’s virtual case file for documents filed under Docket Number 2005-155 (the service quality multiplier issue) and 2009-328 (timing of payments).
Contact: Evelyn deFrees 207-287-6141 or evelyn.defrees@maine.gov
