Subd. 1. Incentive plans.

1. (a) A telephone company whose general revenue requirement is determined under section 237.075 may petition the commission for approval of an incentive plan. The incentive plan must apply to the noncompetitive services of a company covered by section 237.62, subdivision 1, and must apply to noncompetitive services and services subject to emerging competition if the company has chosen to be governed by section 237.62, subdivision 1a. The purpose of the plan is to provide an incentive to the company to improve its operating efficiency while maintaining or improving the quality of its service. If a telephone company is able to increase its earnings, the telephone company shall share the increased earnings with its customers to the extent and in the manner set forth in the commission-approved plan. The commission may not approve a plan that does not meet the requirements of this paragraph and paragraphs (b) to (f).
2. (b) A telephone company shall share increased earnings during the term of the incentive plan with its customers either by giving them credits against bills or by lowering rates. The division of increased earnings between the company and the customers must reflect the degree to which the company has assumed a risk of earning less than its revenue requirement and the degree to which the customers have assumed a risk of rate increases. Any plan approved or renewed under this section after August 1, 1994, must require that the percentage of increased earnings shared with customers change in relation to the amount that earnings exceed the last authorized return on equity for that company.
3. (c) The incentive plan must be in effect for at least two years.
4. (d) The incentive plan must provide for periodic reporting to the commission to document that the sharing requirements of the plan are being properly implemented. The company's rates and earnings under the plan are not subject to section 237.081, subdivision 2, paragraph (b), except to the extent necessary to enforce the sharing provisions of the incentive plan.
5. (e) An incentive plan may not permit rate increases except under other provisions in this chapter. The plan may, however, permit the direct pass-through of cost decreases and increases approved or reallocated by a governmental entity, except for changes in intrastate depreciation schedules.

6. (f) An incentive plan approved or renewed by the commission pursuant to this section after August 1, 1994, must contain:

   1. (1) specific standards for measuring the quality of noncompetitive services and services subject to emerging competition in all areas served by the company and including, but not limited to, standards concerning installation and time intervals for restoration or repair of service, trouble rates, exchange access line held orders, customer satisfaction, and dial tone speed;
   2. (2) quality reports provisions for reporting to the commission at least annually the company's performance as to the quality of service standards;
   3. (3) indexing provisions that index quality of service improvements for local residence services to similar improvements for local business services; and
   4. (4) appropriate remedies, which may include incentives and sanctions, that may apply to ensure substantial compliance with the quality of service standards set forth in the plan.

Subd. 2. Adoption of a plan.

Before acting on a petition for approval of an incentive plan, the commission shall conduct any public meetings it may consider necessary. The commission shall require the petitioning telephone company to provide notice of the proposed plan to its customers, along with a summary description of the plan provisions and the dates, times, and locations of public meetings scheduled by the commission. In addition to public meetings, the commission shall conduct a proceeding under section 237.61 to decide whether to approve the plan. The commission shall issue findings of fact and conclusions concerning the appropriateness of the proposed plan and the terms and conditions of the sharing of increased earnings between the company and its customers. The commission may approve, reject, or modify a proposed plan, but may not order that a modified plan take effect without the agreement of the petitioning telephone company. The commission shall reject a plan if it has substantial reason to believe that existing rates are inappropriate. The commission shall issue its decision on a plan within six months after receiving the petition to approve the plan. If the commission does not act within six months, the plan is deemed withdrawn unless the commission and the petitioning company agree to an extension of the time for commission action.

* NOTE: See section 237.5799