Acting in a long-standing controversy in Ill. over setting TELRIC...

law aimed at raising the rates. Upholding a decision by a U.S. Dist. Court in Chicago, the 7th U.S. Appeals Court, Chicago, said the ICC now could open a proceeding to change TELRIC rates but couldn’t be guided by the changes in costing factors specified in the state law. The law had changed the depreciation and network fill factors to produce higher rates, a move that was supported by SBC Ameritech but strongly opposed by CLECs. The 7th Circuit decision written by Judge Frank Easterbrook indicated annoyance with the whole process, including the fact that the appeal brought by AT&T and MCI originally was known as Voices for Choices v. Illinois Bell: “AT&T tried to give the suit a public- interest patina by making ‘Voices for Choices’ -- which despite its name is a trade association rather than a consumers’ group -- the lead plaintiff… We have changed the caption to reflect the real parties in interest.” The new caption is AT&T Communications v. Illinois Bell. The appeals court also complained that the CLECs had filed suit too soon after the state law was passed, before the ICC “had applied the statute and announced new rates,” which “has caused unnecessary troubles.” Easterbrook wrote: “Congress provided for federal judicial review of rates set by state commissions; it did not provide for review of individual factors that influence those rates.” On the legality of the state’s action in general, the appeals court said state legislatures weren’t barred from playing any role at all in ratemaking, although the Telecom Act named the PUC as the regulator and arbitrator. However, the court said, the legislature can’t unilaterally preempt the PUC as the primary regulator: “An attempt by the state legislature to set rates by itself would transgress the federal statute.” The state law clearly errs in one particular way, the appeals court said: “The state law, as the ICC understood and applied it, does require these factors to be used in isolation. The ICC took as set in stone all ingredients of ratemaking from 1997 and it adjusted the rate only by changing fill factors and asset lives. That approach conflicts with the 1996 Act and the TELRIC methodology and is therefore preempted… A rate for unbundled network elements generated by combining some factors that are 6 years out of date with 2 other factors that are not forward-looking cannot possibly satisfy the requirements of federal law.” SBC contended in oral argument that the problem could be solved in a future ratemaking, the court said, “but the possibility of repair in the future is no warrant for promulgating today a rate that deviates from the TELRIC standard.” The bottom line is that “the injunction still bars from the ICC from using [the state law] to set rates,” the court said. “If the elected branches of state government want the Commission to proceed along these lines, they must enact new legislation that addresses fill factors and asset lives as elements of a comprehensive process.” The court urged the ICC to move quickly to set a new rate because “a rate that is long out of date, as this 1997 rate is, frustrates the goals of TELRIC every bit as much as does a rate generated under the flawed state legislation.”