DT 99-042
                         BELL ATLANTIC
          Special Contract with the County of Cheshire
      Order Denying the Special Contract Without Prejudice
                   O R D E R   N O.  23,198  
                         April 16, 1999
            On March 19, 1999, New England Telephone and Telegraph
     Company d/b/a Bell Atlantic (BA-NH or the Company) filed with the
     New Hampshire Public Utilities Commission (Commission), pursuant
     to RSA 378:18, a petition for approval of Special Contract No.
     99-2 (Special Contract) with the County of Cheshire.   The
     proposed special contract, executed on December 22, 1998,
     provides Centrex line systems  comprised of analog lines.   
     Along with the special contract, Bell Atlantic filed a contract
     overview and cost study details in support of the filing.  
            Concurrently, Bell Atlantic filed a Motion for
     Protective Order, seeking to exempt portions of the Special
     Contract and supporting materials from public disclosure.  The
     Commission will rule on that motion separately. However, pursuant
     to N.H. Admin. Rules Puc 204.06, the identified portions will be
     kept confidential until the Commission rules on the motion. 
            Bell Atlantic's cost study avers that the special
     contract's proposed rates exceed the incremental costs of the
     services being provided, pursuant to the requirements of RSA
     378:18-b.  RSA 378:18 applies to special contracts in general and
     RSA 378:18-b applies specifically to special contracts offered by
     telephone utilities.  Those statutes state:
       378:18  Special Contracts for Service.
         Nothing herein shall prevent a public utility from making a
       contract for service at rates other than those fixed by its
       schedules of general application, if special circumstances
       exist which render such departure from the general schedules
       just and consistent with the public interest and, except as
       provided in RSA 378:18-b, the commission shall by order
       allow such contract to take effect.
         378:18-b Special Contracts; Telephone Utilities
         Any special contracts for telephone utilities providing
       telephone services shall be filed with the commission and
       shall become effective 30 days after filing, provided the
       rates are set not less than:
                        I.   The incremental cost of the relevant service; or
                        II.  Where the telephone utilities competitors must
                 purchase access from the telephone utility to 
                 offer a competing service, the price of the lowest
                 cost form of access that competitors could
                 purchase to compete for customers with comparable
                 volumes of usage, plus the incremental cost of 
                 related overhead.
            Staff's review of the proposed Special Contract raises
     questions as to whether the proposed rates meet the requirement
     of RSA 378:18-b.  The questions arise in the context of the
     current evolution of the telecommunications industry to a
     competitive industry after passage of the Telecommunications Act
     of 1996 (TAct).  BA-NH's filing follows the incremental cost
     calculation methodology which was heretofore accepted as
     adequate.  However, as required by the Federal Communications
     Commission (FCC) in implementing the TAct, the Commission must
     employ a Total Element Long Run Incremental Cost (TELRIC)
     methodology for calculating the costs of unbundled network
     elements (UNEs) that BA-NH offers for sale to Competitive Local
     Exchange Carriers (CLECs).  When the rates under this contract
     are compared to the TELRIC prices that Bell Atlantic has sought
     our approval of in docket DE 97-171, it is not clear that the
     requirements RSA 378:18-b have been met.  Furthermore, there are
     outstanding concerns that approval of this special contract at
     the proposed rates will have the effect of being anti-competitive
     and subsidized by other captive ratepayers. Accordingly, we
     believe it is appropriate to move ahead with docket DT 99-018 to
     explore the issues raised by Bell Atlantic's employment of an
     incremental cost methodology for purposes of meeting its
     obligation under RSA 378:18-b and using another methodology for
     setting wholesale prices charged to competitors.
       The language of RSA 378:18-b would have this Special
     Contract go into effect 30 days from filing if the conditions set
     forth therein are present. Because we are unable to determine at
     this juncture the appropriate "incremental cost" as that term is
     used in RSA 378:18-b, we will deny the Petition without
     prejudice.  Bell Atlantic may refile the petition after
     resolution of the question outlined above.  In addition, if the
     outcome of the separate investigation supports Bell Atlantic's
     position, we will consider making this Special Contract, refiled
     after such resolution, effective 30 days from March 19, 1999, the
     date of the original filing.
            Based upon the foregoing, it is hereby
            ORDERED, that Bell Atlantic's petition for approval of
     the Special Contract is hereby DENIED without prejudice.
            By order of the Public Utilities Commission of New
     Hampshire this sixteenth day of April, 1999.
           Douglas L. Patch       Susan S. Geiger     Nancy Brockway
               Chairman           Commissioner          Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary