2023 Tennessee Code › Title 65 - PUBLIC UTILITIES AND CARRIERS (§§ 65-1-101 — 65-37-104) › Chapter 5 - REGULATION OF RATES (§§ 65-5-101 — 65-5-403) › Part 1 - PUBLIC UTILITIES (§§ 65-5-101 — 65-5-114) › Section 65-5-109 - Price regulation plan

(a)
Rates for telecommunications services are just and reasonable when they are determined to be affordable as set forth in this section. Using the procedures established in this section, the commission shall ensure that rates for all basic local exchange telephone services and non-basic services are affordable on the effective date of price regulation for each incumbent local exchange telephone company.
(b)
An incumbent local exchange telephone company shall, upon approval of its application under subsection (c), be empowered to, and shall charge and collect only such rates that are less than or equal to the maximum permitted by this section and subject to the safeguards in §
65-5-108(c) and (d)
and the non-discrimination provisions of this title.
(c)
The commission shall enter an order within ninety (90) days of the application of an incumbent local exchange telephone company implementing a price regulation plan for such company. With the implementation of a price regulation plan, the rates existing on January 1, 2009, for all basic local exchange telephone services and non-basic services, as defined in §
65-5-108
, are deemed affordable if the incumbent local exchange telephone company's earned rate of return on its most recent Tennessee public utility commission 3.01 report as audited by the commission staff pursuant to subsection (j) is equal to or less than the company's current authorized fair rate of return existing at the time of the company's application. If the incumbent local exchange telephone company's earned rate of return on its most recent Tennessee public utility commission 3.01 report as audited by the commission staff pursuant to subsection (j) is greater than the company's current authorized fair rate of return, the commission shall initiate a contested, evidentiary proceeding to establish the initial rates on which the price regulation plan is based. The commission shall initiate such a rate-setting proceeding to determine a fair rate of return on the company's rate base using the actual intrastate operating revenues, expenses, rate base and capital structure from the company's most recent Tennessee public utility commission 3.01 report as audited by the commission staff pursuant to subsection (j). If the incumbent local exchange telephone company's earned rate of return is less than its current authorized fair rate of return, the company may request the commission to initiate a contested, evidentiary proceeding to establish the initial rates upon which the price regulation plan is based. Upon request by the incumbent local exchange telephone company, the commission shall initiate such a contested, evidentiary proceeding using the same rate-setting procedures described above. Rates established pursuant to the above process shall be the initial rates on which a price regulation plan is based, subject to such further adjustment as may be made by the commission pursuant to §
65-5-107
. Nothing in this section shall require a company that has elected price regulation prior to 2009 to reapply for price regulation or to reset its rates under its price regulation plan. Such a company is entitled, in its sole discretion, to the 1995 rates upon which its original election was based or may base its price regulation calculation upon rates in effect as of January 1, 2009.
(d)
If not resolved by agreement, the commission shall, on petition of the competing telecommunications services provider, hold a contested case proceeding within thirty (30) days to establish initial rates for new interconnection services provided by an incumbent local exchange telephone company subsequent to June 6, 1995, which rates shall be set in accordance with chapter 408 of the Public Acts of 1995. The commission shall issue a final order within twenty (20) days of the proceeding.
(e)
A price regulation plan shall maintain affordable basic and non-basic rates by permitting a maximum annual adjustment that is capped at the lesser of one-half (1/2) the percentage change in inflation for the United States using the gross domestic product-price index (GDP-PI) from the preceding year as the measure of inflation, or the GDP-PI from the preceding year minus two (2) percentage points. An incumbent local exchange telephone company may adjust its rates for basic local exchange telephone services or non-basic services only so long as its aggregate revenues for basic local exchange telephone services or non-basic services generated by such changes do not exceed the aggregate revenues generated by the maximum rates permitted by the price regulation plan.
(f)
Notwithstanding the annual adjustments permitted in subsection (e), the initial basic local exchange telephone service rates of an incumbent local exchange telephone company subject to price regulation shall not increase for a period of four (4) years from the date the incumbent local exchange telephone company becomes subject to such regulation. At the expiration of the four-year period, an incumbent local exchange telephone company is permitted to adjust annually its rates for basic local exchange telephone services in accordance with the method set forth in subsection (e); provided, that the rate for residential basic local exchange telephone service shall not be increased in any one (1) year by more than the percentage change in inflation for the United States using the gross domestic product-price index (GDP-PI) from the preceding year as the measure of inflation. Nothing in this subsection (f) shall be construed to prohibit or limit residential basic local exchange rate increases or aggregate revenues permitted in subsection (e) caused by:
(1)
Revenue neutral rate proposals that rebalance access revenue or touchtone revenue to residential basic local exchange service;
(2)
Revenue neutral rate proposals that expand local calling areas; or
(3)
Rate regrouping when it is based on population growth or expanded local calling such that there is an increase in the number of lines that end-users within the rate group can reach by local calling and the rate group no longer corresponds to the rate group definitions in a carrier's approved tariffs.
(g)
Notwithstanding any other provision of this section, a price regulation plan shall permit a maximum annual adjustment in the rates for interconnection services that is capped at the lesser of one-half (1/2) the percentage change in inflation for the United States using the gross domestic product-price index (GDP-PI) from the preceding year as the measure of inflation, or the GDP-PI from the preceding year minus two (2) percentage points. An incumbent local exchange telephone company may adjust its rates for interconnection services only so long as its aggregate revenues generated by such changes do not exceed the aggregate revenues generated by the maximum rates permitted by this subsection (g); provided, that each new rate must comply with the requirements of §
65-5-108
and the non-discrimination provisions of this title. Upon filing by a competing telecommunications service provider of a complaint, such rate adjustment shall become subject to commission review of the adjustment's compliance with this section and rules promulgated under this section. The commission shall stay the adjustment of rates and enter a final order approving, modifying or rejecting such adjustment within thirty (30) days of the complaint.
(h)
Incumbent local exchange telephone companies subject to price regulation may set rates for non-basic services as the company deems appropriate, subject to the limitations set forth in subsections (e) and (g), the non-discrimination provisions of this title, any rules or orders issued by the commission pursuant to §
65-5-108(c)
and upon prior notice to affected customers. Rates for call waiting service provided by an incumbent local exchange telephone company subject to price regulation shall not exceed, for a period of four (4) years from the date the company becomes subject to such regulation, the maximum rate in effect in the state for such service on January 1, 2009; provided, however, that the maximum rate shall not apply to companies becoming subject to that regulation after June 1, 2009.
(i)
Incumbent local exchange telephone companies subject to price regulation are not required to seek regulatory approval of their depreciation rates or schedules.
(j)
For any incumbent local exchange telephone company electing price regulation under subsection (c), the commission shall conduct an audit to assure that the Tennessee public utility commission 3.01 report accurately reflects, in all material respects, the incumbent local exchange telephone company's achieved results in accordance with generally accepted accounting principles as adopted in Part 32 of the uniform system of accounts, and the ratemaking adjustments to operating revenues, expenses and rate base used in the commission's most recent order applicable to the incumbent local exchange telephone company. Nothing herein is to be construed to diminish the audit powers of the commission; provided, however, that such an audit shall not be conducted for a local exchange telephone company electing price regulation after June 1, 2009.
(k)
Incumbent local exchange telephone companies subject to price regulation shall maintain their commitment to the FYI Tennessee master plan to the completion of the funded requirements with any alterations to the plan to be approved by the commission.
(l)
(1)
Any nonincumbent certificated provider of local exchange telephone or intrastate long distance telephone service or any incumbent certificated provider of local exchange or intrastate long distance telephone service that has elected price regulation pursuant to subsections (a)-(k) may, in its sole discretion, elect to operate pursuant to market regulation, by filing notice of its intent to do so with the commission, which shall be effective immediately upon filing.
(2)
For purposes of the rural exemption under
47 U.S.C. § 251
only, the election to operate pursuant to market regulation by a rural incumbent certificated provider of local exchange or intrastate long distance telephone service, as provided in this section, shall constitute an acknowledgement that a bona fide request for interconnection or services is not unduly economically burdensome, is technically feasible, will not present a risk of a significant adverse economic impact on users of telecommunications services generally, is consistent with
47 U.S.C. § 254
and is consistent with the public interest, convenience and necessity. This subdivision (
l
)(2) shall not apply to any telephone cooperative organized pursuant to §
65-29-102
.
(m)
Upon election of market regulation by a certificated provider, the provider shall be exempt from all commission jurisdiction, including, but not limited to, state-based regulation of retail pricing or retail operations, except as defined in subsection (n). Notwithstanding the limitations on commission jurisdiction over market-regulated companies under state law as set forth in this section, it is the express intent of the general assembly that the Tennessee public utility commission is authorized as a matter of state law to receive any jurisdiction delegated to it by the federal 1996 Telecommunications Act, in
47 U.S.C. § 214(e)
, or federal communications commission (FCC) orders or rules, including, without limitation, jurisdiction granted to hear complaints regarding anti-competitive practices, to set rates, terms and conditions for access to unbundled network elements and to arbitrate and enforce interconnection agreements. In addition, the commission shall continue to exercise its jurisdiction in its role as a dispute resolution forum to hear complaints between certificated carriers, including complaints to prohibit anti-competitive practices and to issue orders to resolve such complaints. The commission shall interpret and apply federal, not state, substantive law, which is hereby adopted so that such law is applicable to intrastate services for the purpose of adjudicating such state complaints. The commission shall adjudicate and enforce such claims in accordance with state procedural law and rules, including the enforcement and penalty provisions of §
65-4-120
. No claim shall be brought to the Tennessee public utility commission as to which the FCC has exclusive jurisdiction. All complaints brought between carriers pursuant to this section shall be resolved by final order of the commission within one hundred eighty (180) days of the filing of the complaint.
(n)
A certificated provider electing market regulation shall be subject to the jurisdiction of the commission only when:
(1)
The commission is exercising its jurisdiction as described in subsection (m);
(2)
The commission is acting with respect to enforcement or modification of any wholesale self effectuating enforcement mechanism plan in place as of January 1, 2009; provided, that such actions are consistent with federal telecommunications law;
(3)
The commission is assessing and collecting inspection fees calculated in accordance with chapter 4, part 3 of this title and election of market regulation shall not alter the character of any intrastate revenue or remove any source of intrastate revenue formerly included within gross receipts and used for purposes of assessment of the fees;
(4)
The commission is exercising jurisdiction over video service franchises pursuant to the Competitive Cable and Video Services Act, compiled in title 7, chapter 59, part 3;
(5)
The commission is exercising jurisdiction respecting underground facilities damage prevention;
(6)
The commission is exercising jurisdiction respecting the Tennessee relay center services or the Tennessee devices access program pursuant to §
65-21-115
;
(7)
The commission is exercising jurisdiction respecting the small and minority-owned business participation plan pursuant to §
65-5-112
;
(8)
The commission is exercising jurisdiction respecting universal service funding pursuant to §
65-5-107
;
(9)
The commission is exercising jurisdiction respecting intrastate switched access service;
(10)
The commission is exercising jurisdiction respecting extensions of facilities pursuant to §
65-4-114(2)
, except that no market-regulated carrier shall be subject to the regulatory commission jurisdiction in this subdivision (n)(10) in any wire center or geographic area the carrier designates by filing notice of such designation with the regulatory commission. Such notice shall be effective immediately upon filing and not subject to regulatory commission review;
(11)
The commission is exercising jurisdiction pursuant to §
65-4-125
; provided, however, that the commission shall exercise its jurisdiction under subsections (a) or (b) only in connection with a complaint.
(o)
Incumbent local exchange providers that have elected market regulation shall not be entitled to the limitation on commission jurisdiction in subsection (n) with respect to those residential local exchange telecommunications services that are offered in exchanges with less than three thousand (3,000) access lines or, for carriers who serve more than one million (1,000,000) access lines in this state, those exchanges with access line counts and calling areas that would result in classification as rate group 1 or 2 under any such carrier's tariff in effect on January 1, 2009, and that are offered as single, individually priced services at a rate-group specific price rather than a state-wide or territory-wide price, except as follows:
(1)
Upon petition by a market-regulated provider, the commission may order that such services shall be subject to the limitations on jurisdiction in subsection (n) by showing that each exchange has at least two (2) nonaffiliated telecommunications providers that offer service to customers in each zone rate area of each exchange;
(2)
When counting the number of providers for the purpose of evaluating the competition standard in subdivision (o)(1), cable television providers that offer telephone and broadband services to residential customers may be included. Nonaffiliated providers of wireless service may be included in the count of providers but shall only count as one (1) provider regardless of the number of wireless providers. Nonaffiliated providers of voice over internet protocol service shall not be counted for the purpose of evaluating the competitive exemption for residential service, unless the carrier seeking exemption offers a data service capable of supporting voice over internet protocol service and does not require the purchase of voice telephony products to buy the data service. At least one (1) provider must be facilities-based and currently serving residential customers;
(3)
When the petitioning party shows facts satisfying the competition standard set forth in subdivision (o)(1), the petitioner shall be entitled to a rebuttable presumption that the competition standard is satisfied;
(4)
The petition shall be subject to an accelerated schedule. The commission must issue its decision on the petition, including its reasons, within ninety (90) days of the filing of the petition;
(5)
Unregulated providers of service shall not be required to participate in the commission's docket considering the petition, but, to the extent such competitors intervene, they shall be required to provide discovery responses regarding the activities of the unregulated provider in such rate groups or exchanges. To the extent the petitioner seeks, but is unable to obtain discovery response from intermodal or unregulated providers regarding the competition present in such rate groups or exchanges, the petitioner shall be entitled to a rebuttable presumption that the unregulated provider is offering service in the area that is the subject of the petition;
(6)
Whether or not such a petition is filed or granted, the limitations on commission jurisdiction set forth in subsection (n) shall automatically become applicable to all services of a market-regulated provider as of January 1, 2015; and
(7)
The petition provided for in this subsection (o) shall be filed no earlier than one (1) year following May 21, 2009.
(p)
Notwithstanding this section, providers that elect market regulation shall remain subject to the Tennessee Consumer Protection Act, compiled in title 47, chapter 18.
(q)
(1)
Each year the commission shall prepare and submit to the general assembly a report describing the competitive nature of the communications market in Tennessee.
(2)
The report shall, at a minimum, contain the following information:
(A)
The number of telecommunications providers, including the technology used to provide service;
(B)
The number of providers by county serving residential subscribers;
(C)
The number of providers by county serving business subscribers; and
(D)
The number of customers by customer type.
(3)
In preparing the report, the commission shall rely on information filed with the commission or available as public information. The commission shall invite all providers of telecommunications services, including companies operating under market regulation, price cap regulation pursuant to this section, rate of return regulation, competitive carriers, wireless carriers, carriers offering voice over internet protocol service, cable operators or other carriers known to provide such service in this state, to provide voluntary reports supplying information relating to the items in subdivision (q)(2) and relating to the services and products offered in this state and any other information the provider volunteers concerning future plans for deployment, new services, new technology or the scope of competition.
(r)
In the event that a carrier has elected market regulation and later chooses to exit the business of providing local exchange telephone service in an exchange by selling all of its network in that exchange to another entity, then the following shall apply:
(1)
If the purchasing entity is a certificated carrier of local exchange telephone service in this state, then no regulatory requirements shall apply, except that nothing in this section shall preclude the exercise of commission jurisdiction as set forth in subsection (m); and
(2)
Any purchasing entity that applies for a certificate in connection with a sale of the type described in this section shall be subject to no greater standards than those applied by the commission for other entities seeking certification pursuant to §
65-4-201
; and a commission order granting or denying the certificate, including appropriate findings of fact and conclusions of law, shall be entered no later than thirty (30) days from the filing of the application.
(s)
Notwithstanding any other laws to the contrary, including, but not limited to, subsections (c) and (j), the earnings of an incumbent local exchange company operating under rate of return regulation shall not be considered in setting initial rates under this section for an incumbent local exchange company implementing a price regulation plan after January 1, 2009.
(t)
Notwithstanding any law to the contrary, any certificated provider of local exchange telephone service subject to market regulation may, at its election, file a tariff with the commission governing the rates, terms and conditions of any of its services. Such filed tariff shall become effective upon filing and be deemed approved, unless rejected by the commission upon finding that the tariff violates applicable law within twenty-one (21) days of filing. The approval of a tariff under this subsection (t) shall constitute publication and notice to consumers of the provisions of the tariff, specifically those provisions governing carrier and consumer liability, for purposes of the filed rate doctrine. Unless rejected as provided herein, such tariffs shall constitute binding tariffs to the same extent as tariffs of other providers not subject to market regulation, including application of the filed rate doctrine, and shall be subject to the rules and regulations of the commission governing customer notices to the same extent as such rules apply to providers not subject to market regulation.
(u)
The regulatory commission is prohibited from creating any new programs mandating discounts on retail telecommunications services or equipment without providing reimbursement to carriers. Any such unfunded discount program mandated by rules or orders of the regulatory commission or public service commission that was in place as of March 26, 2013, shall terminate sixty (60) days following March 26, 2013. Nothing in this subsection (u) shall apply to existing regulatory commission programs providing services for individuals who are deaf or hard of hearing.
(v)
The regulatory commission shall not impose any requirements relating to issuance or maintenance of a certificate pursuant to §
65-4-201
on any market-regulated entity or on any affiliate of a market-regulated entity.
Amended by 2019 Tenn. Acts, ch. 329, s 2, eff. 5/8/2019.
Amended by 2013 Tenn. Acts, ch. 61, Secs.s 2, s 3, s 4 eff. 3/26/2013.
Acts 1995, ch. 408, § 10; T.C.A. § 65-5-209; Acts 2005, ch. 71, § 1; 2009 , ch. 278, §§ 2, 3; 2010 , ch. 973, § 1.