28247.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE TARIFF ADVICE AMENDMENTS SUBMITTED BY THE IDAHO RURAL EXCHANGE CARRIERS, ALBION TELEPHONE AND RURAL TELEPHONE COMPANY REGARDING THE CARRIERS’ Y2K LIABILITY AND GENERAL LIABILITY LIMITATIONS. )
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CASE NO. GNR-T-99-23

ORDER NO. 28247

On December 1, 1999, GVNW Consulting, Inc. submitted three tariff advices on behalf of the Idaho Rural Exchange Carriers (IREC), Rural Telephone Company, and Albion Telephone dba ATC. All three tariffs proposed liability limitations for Y2K events and absolve the telephone companies of consequential, incidental and indirect damages for their negligent actions. In addition, Rural’s tariff advice proposed to limit its liability to an amount equivalent to the proportionate charge for the period of service disrupted. GVNW requested that the tariff advices become effective December 31, 1999.

THE TARIFF ADVICES
The purpose of the tariff advices was to limit the carriers’ potential liability in several instances. First, the companies sought to limit their liability associated with Y2K computer operations and problems with the delivery of other services or products from third parties that may arise at the close of the century. In this respect, the parties propose that their Y2K liability be limited by the following tariff restrictions:
The Telephone Company will make reasonable efforts to cure any material failure to provide service caused solely by Year 2000 defects in telephone company hardware, software or systems. Due to the interdependence among telecommunications providers and the interrelationship with non-Telephone Company processes, equipment and systems, the Telephone Company is not responsible for failures caused by circumstances beyond its control including, but not limited to, failures caused by: (1) the Customer; (2) other telecommunications providers; (3) customer premise equipment; or (4) third party supplier such as power companies, software companies, and equipment manufacturers. In addition, the Telephone Company does not ensure compatibility between Telephone Company and non-Telephone Company services used by the customer.

Second, the telephone companies also proposed to limit their liability for consequential, incidental or indirect damages (not necessarily limited to Y2K events). They proposed the following liability limitations in their tariffs:
The Telephone Company will not be liable for any consequential, incidental or indirect damages for any cause of action, whether in contract or tort. Consequential, incidental and indirect damages include, but are not limited to lost projects, lost revenues and loss of business opportunity, whether or not the Telephone Company was aware or should have been aware of the possibility of these damages.

Finally, Rural Telephone requested that the Commission approve tariff liability limitations “arising out of mistakes, omissions, interruptions, delays, or errors or defects in transmission.” The Company sought to limit damages not to exceed “an amount equivalent to the proportionate charge to the customer for the period of service during which” service is disrupted. For example, if the Company’s negligence causes a service disruption of one day, the customer would be entitled to damages not to exceed one day’s proportionate rate for monthly local service.
During its review of the tariff advices, the Commission Staff suggested and GVNW agreed to include an additional provision in the three advices. GVNW added an “explanatory clause” stating that it would be up to a court to decide the validity of the liability limitations. Following the inclusion of the explanatory clauses, Staff recommended approving the tariffs but did “not necessarily agree that terms to limit liability belong in a tariff.” Staff also observed that Y2K liability has been addressed in the federal Y2K Act signed into law on July 20, 1999. The Staff presented this matter to the Commission at its Decision Meeting on December 20, 1999.

DISCUSSION
In these three tariff advices, GVNW requests (on behalf of its client telephone companies) liability limitations for Y2K events. The companies also seek to limit their liability for consequential, incidental or indirect damages relating to more than just Y2K events. In addition, Rural seeks to limit liability for its negligence to an amount equivalent to the proportionate charge to the customer for the period of service during which a mistake, omission, interruption, delay, error, or defect in transmission occurred. After reviewing the tariff advices and the Staff’s analysis, we deny the tariff advices for three reasons.
First, a review of tariffs and tariff advices is necessary. Tariffs regulate the relationship between the utility and its customers. Tariffs cannot become effective without first submitting them to the Commission for approval. Idaho Code §§ 61-307, 61-503, and 61-623. Tariff advices are proposed changes to utility tariffs. Typically, tariff advices are primarily used to introduce new services or practices or “minor changes to existing schedule.” Rule 134.01 (emphasis added), IDAPA 31.01.01.134.01. Normally, customers are not individually notified of such changes because they are apprised of rate or service changes at the time they request new services or request nonrecurring, one-time services (such as installations, change orders, line extensions).
Returning to the three tariff advices, we find that these proposals to limit the companies’ liability are not minor changes but represent significant amendments to tariffs. Moreover, the tariff advices addressed more than simply Y2K events as stated in the transmittal letters. Consequently, we find it inappropriate to consider these issues in a tariff advice proceeding. We believe that the appropriate course of action would be for the companies to submit Applications requesting these liability limitations. Submitting Applications would provide greater public notice than using tariff advice procedures. Compare Rule 52 (Applications) with Rule 134 (Tariff Advices).
Second, the Commission has previously addressed tariffs limiting liability. In an earlier case examining telephone liability limitations, the Commission found that tariffs limiting liability are seldom just and reasonable. Order No. 22812. The Commission observed that such limitations should only be approved if the record demonstrates that: (1) it is in the public interest and encourages the provision of telecommunication service; and (2) there is a substantial likelihood that such service would not be provided in the absence of such liability limitations. Id. Without addressing the merits of the proposed tariff provisions to limit liability, we find that the tariff advices do not address these points.
Third, the federal Y2K Act addresses liability for Y2K actions and specifically preempts state law to the extent that the state law may be inconsistent with the federal Act. Without a more detailed analysis of the interrelationship between the federal Act and these tariff liability provisions, the Commission declines to approve the three tariff advices at this time.
Although the Commission has declined to approve the three tariff advices, we do so without prejudice. If the Companies believe that such liability limitations are necessary, reasonable and satisfy the conditions mentioned above, the parties may submit appropriate Applications to the Commission.

O R D E R
IT IS HEREBY ORDERED that the tariff advices submitted by GVNW on behalf of the Idaho Rural Exchange Carriers, Albion Telephone dba ATC, and Rural Telephone are denied without prejudice.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally decided by this Order) or in interlocutory Orders previously issued in this Case No. GNR-T-99-23 may petition for reconsideration within twenty-one (21) days of the service date of this Order with regard to any matter decided in this Order or in interlocutory Orders previously issued in this Case No. GNR-T-99-23. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this
day of December 1999.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Barbara Barrows
Assistant Commission Secretary

Vld/O:GNR-T-99-23_dh
Companies joining the IREC access tariff include: Albion Telephone d.b.a. ATC; Custer Telephone Coop.; Filer Mutual Telephone Company; Midvale Telephone Exchange; Potlatch Telephone Company; Direct Communications; Troy Telephone Company; Silver Star Telephone Company; Council Telephone Co.; Fremont Telecom Company; Cambridge Telephone Co.; Farmers Mutual Telephone Co.; Inland Telephone Company; Mud Lake Telephone Coop. Assn.; Project Mutual Telephone Coop.; Rural Telephone Company; CenturyTel of Idaho, Inc. d.b.a. CenturyTel; Sawtooth Telephone Company and Columbine Telephone Company d.b.a. Teton Telecom Communications.

ORDER NO. 28247 1

Office of the Secretary
Service Date
December 30, 1999