20020613Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RANDY LOBB
DON HOWELL
LISA NORDSTROM
LYNN ANDERSON
BEVERLY BARKER
RON LAW
GENE FADNESS
TONYA CLARK
WORKING FILE
FROM:TERRI CARLOCK
DATE:JUNE 13,2002
RE:ALBION TELEPHONE COMPANY'S REQUESTTO BORROW UP TO
$15 MILLION;CASE NO.ALB-T-02-2.
Albion TelephoneCompany (Albion)filed an Application requesting authorityto borrow
up to $15 Million from the Rural TelephoneUtilities Service (RUS).The proposed RUS loan
should qualify for the 5%hardship rate with a 15-year loan maturity.If not,the interest rate will
be at RUS's then current market rate at the time of closing.The loan will be secured by a first
mortgage lien on Albion's assets under a SupplementalMortgage and Security Agreement.
Proceeds of the loan will be utilized to:1)upgrade central office switching,2)install
additional fiber and upgrade outside plant,3)fund construction to meet anticipated customer
growth,and 4)general system improvements.
STAFF DISCUSSION AND RECOMMENDATION
A portion of these loan funds will be used for non-regulated services.Staff continues to
express concern about using regulated assets and operations to secure non-regulated activities.
Any adjustments associated with non-regulated costs will occur in future rate cases.
DECISION MEMORANDUM l JUNE 13,2002
To monitor any loan covenants required by RUS,Staff recommends the following
reporting requirements be included in the Order approving the Application:
1)Provide copies of the RUS final loan approvals includingdocumentation for
advances.
2)Provide a copy of any executed collateral documentation.
3)Provide copies of all annual certification,covenant reports,and letters regarding these
determinations.
4)The "Report of Securities Issued".
COMMISSION DECISION
Should the Application be approvedwith Staff's recommended reporting requirements?
Terri Carlock
TC:udmemos/alb-t-02-2deememo.TC.doc
DECISION MEMORANDUM 2 JUNE 13,2002