09072001.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
BILL EASTLAKE
LOU ANN WESTERFIELD
DON HOWELL
RANDY LOBB
BEV BARKER
TONYA CLARK
GENE FADNESS
WORKING FILE

FROM: JOHN R. HAMMOND

DATE: SEPTEMBER 7, 2001

RE: IN THE MATTER OF THE PETITION OF VERIZON NORTHWEST, INC. FOR A WAIVER FROM THE COMMISSION’S TELEPHONE CUSTOMER RELATIONS RULES REGARDING PARTIAL PAYMENT APPLICATION. CASE NO. VZN-T-01-8.

On June 21, 2001, Verizon Northwest, Inc. filed a Petition requesting that the Commission grant it exemptions from Rules 306.06 and 312.03 of the Telephone Customer Relations Rules. IDAPA 31.41.01. On July 31, 2001, the Commission issued a Notice of Application and Notice of Modified Procedure. Order No. 28794. In this Order the Commission established a written comment deadline for interested persons and parties. In response to this Order the Commission Staff and Verizon filed written comments.
VERIZON’S PETITION
Verizon states that its billing system does not have the capability to accommodate customers’ requests to manually dictate partial payment allocations. Accordingly, the Company states that its system does not technically comply with Rules 306.06 and 312.03. The Company alleges that it has investigated the cost to upgrade its billing system to allow for strict compliance with the manual allocation provisions of Rule 312.03 and 306.06 and estimates that its costs would be approximately $51 million. Verizon states this huge investment would create a substantial hardship for it.
Verizon also states that its inability to comply with these Rules has not resulted in a large number of customer complaints that have come to the Commission, it is aware of only two that mention the limitations of its billing system.
Accordingly, the Company is requesting a waiver from compliance from these Rules for a period of two years. Verizon states that with Commission authorization it will continue to allocate customers’ partial payments in the manner within the current capabilities of its billing system. At the close of the two year period, Verizon proposes that it provide the Commission with a status report on the ability of its billing systems to comply to the letter of these payment allocation rules. Verizon’s written comments filed on August 17, 2001 restated the positions taken in its Petition.
STAFF ANALYSIS AND RECOMMENDATION
Staff believes that payment allocation methods are a critical component of all local exchange companies’ billing and collection systems because a LEC’s customers’ bills often contain charges for products and services provided by a variety of companies. Accordingly, efficient payment allocations to these various entities becomes extremely important.
Verizon’s allocation method applies customer payments first to amounts owed for past due local exchange service, then to past due toll charges and then to past due charges for other products and services. Any remaining amounts are applied to current charges. Staff believes there are two main circumstances where a customer might request a payment allocation method different than that which Verizon is able to provide. First, if a customer disputes amounts billed and second, if the customer wishes to direct payments in order to maintain local dial tone. However, the Company cannot accommodate these types of requests because it states that it cannot manually override its current billing system.
Staff agrees with Verizon that there have been relatively few complaints filed with the Commission, but it does not know how often payment allocation issues arise where customers do not seek the Commission’s help.
Although there have been few complaints regarding Verizon’s inability to accommodate such requests, Staff is concerned that its continuing incapacity in this regard could lead to difficulties in the future. Staff anticipates complaints will arise and will become more complex because of the myriad of products and services from different companies that can appear on Verizon’s bill. Staff is also concerned that the “work around” solutions currently in use increases the likelihood that customers’ problems will not be addressed during the period Verizon is studying the issue.
However, Staff does believe that Verizon would incur costs of some magnitude in order to upgrade its billing system to accommodate these types of requests. Those costs could cause upward pressure on rates. Accordingly, Staff believes that the Company has shown that it could suffer unusual or unreasonable hardships if required to comply with Rules 312.03 and 306.06 of the Telephone Customer Relations Rules. Thus, Staff recommends that the Commission grant the Company a two-year temporary exemption from these Rules contingent upon its continued compliance with the remaining Telephone Customer Relations Rules. Specifically, Staff believes that it is of critical importance for Verizon to comply with Rule 401.02 which requires LEC’s that bill and collect for another company’s services to stop any payment allocations to those charges if the customer disputes them and to remove them from the LEC’s bill no later than two (2) billing cycles following the cycle when the complaint was raised. IDAPA 31.41.01.401.02.
Staff recommends that at the end of two years that Verizon be required to comply in full with the Commission’s Rules or demonstrate that it is in the process of complying with the Rules. Staff notes that these Rules have been in place since 1980 and two years is sufficient for the Company to come into compliance. Although Staff’s comments do not address it, Verizon would also have the option under Commission Rules to request that its exemption, if granted, be extended.
Finally, although the Company has technically been in non-compliance with these Rules Staff does not recommend fining/penalizing the Company as it has been working diligently with the Commission Staff to reach a solution to this situation.
VERIZON REPLY COMMENTS
The Company states that it works with customers who make partial payment contacts in order to meet their needs. In doing so the Company believes that it is doing what the Commission’s Customer Relations Rules require.
The Company disagrees with Staff’s concerns that if its request is granted it would lead to an increased number of customer complaints in the future. The Company states there is no basis for this concern as there have been few complaints to date brought to the Commission regarding partial payment allocations.
The Company also disagrees with the Staff recommendation that it revise its billing system by September 2003, as it believes that it will incur substantial costs in doing so.

COMMISSION DECISION:
Does the Commission wish to approve Verizon’s Application as presented by the Company?
Does the Commission wish to approve Verizon’s Application along with Staff’s recommendations?

John R. Hammond

Staff: Bev Barker

M:VZNT018_jh2
The Company estimates that it would costs it approximately $51 million to make these changes a number that it has not been corroborated with any evidence.

DECISION MEMORANDUM 4