20031211Final Order No 29399.pdf

Office of the Secretary
Service Date
December 11, 2003
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
CAMBRIDGE TELEPHONE COMPANY FOR
AUTHORITY TO BORROW UP TO $17 500,000 )
FROM THE RURAL UTILITIES SERVICE AND )
THE RURAL TELEPHONE BANK.
CASE NO. CAM-03-
ORDER NO. 29399
On November 12, 2003 , Cambridge Telephone Company filed an Application
requesting authority to borrow up to $17.5 million from the Rural Utilities Service (RUS) and the
Rural Telephone Bank (RTB). The proposed financing is to be structured with three loans: (1)
RUS loan of $7 500 000 that qualifies for the 5% hardship interest rate with IS-year loan
maturity; (2) RUS loan of $6 096 000; and (3) RTB loan of $3 547 950. The interest rate on the
latter two loans will be at the respective lender s then current market rate at the time dispersals
on the loans are made. The loans will be secured by a first mortgage lien on Cambridge s assets
under a "Supplemental Mortgage and Security Agreement." The loan contracts will have two
covenants requirements. First, any future investment by Cambridge in CTC Telecom must
receive approval from RUS. Second, a times-interest-earned ratio (TIER) of 1.0 must be
maintained through December 31, 2006 with a TIER of 1.45 after that date.
According to the Application, proceeds of the loan will be utilized for several
purposes. The loans will be used to: implement a long-range network strategy to upgrade
Cambridge s infrastructure by replacing central offices and adding digital subscriber line (DSL)
capacity to provide broadband services; install new fiber optic and buried cable; purchase new
work trucks and test equipment; retire certain existing loans; and for related system
improvements.
STAFF REVIEW
Staff recommended approval of the increased borrowing. However, Staff expressed
concern regarding the use of regulated assets and revenues to secure non-regulated activities.
Based upon the representations in the Application, Staff noted that a portion of the loan funds
will be used to provide non-regulated broadband services, e., DSL. Staff asserted that any
ORDER NO. 29399
ratebase or expense adjustments or allocations associated with non-regulated costs should occur
in future rate cases.
To monitor the loans, Staff recommended adopting the following reporting
requirements:
1. Provide copies of the RUS and R TB final loan approvals including
documentation for advances;
2. Provide a copy of executed collateral documentations;
3. Provide copies of all annual certification, covenant reports, and letters
regarding these determinations;
4. Provide the "Report of Securities Issued.
DISCUSSION AND FINDINGS OF FACT
Cambridge Telephone Company is a telephone corporation within the definition of
Idaho Code ~ 61-121 and is a public utility in the definition of Idaho Code ~ 61-129.
The Idaho Public Utilities Commission has jurisdiction over this matter pursuant to
the provisions of Idaho Code ~~ 61-901 et seq.
After examining the Application and Staff s comments, the Commission finds that an
evidentiary hearing in this matter is not required.The Commission further finds that the
proposed transaction is consistent with the public interest and Cambridge s proper performance
of its duties as a public utility.
The Commission finds that the general purposes to which the loan funds will be
utilized are lawful purposes under the public utilities law and are compatible with the public
interest. However, this approval of the general purposes to which the funds will be put to use is
neither a finding of fact nor a conclusion of law that any particular project, program or future
cost recovery is authorized. Approval of this Order shall not be construed to approve any
particular use ofthe funds which Cambridge may benefit by the approval of this Order.
The Commission further finds that the issuance of an Order authorizing the
borrowing of funds up to $17.5 million does not constitute agency determination/approval of the
type of financing or the related costs for ratemaking purposes. The Commission expressly
reserves the ratemaking implication from these loans until an appropriate future proceeding.
ORDER NO. 29399
The Commission s approval of this Application is conditioned upon Cambridge
satisfying the four reporting requirements recommended by the Staff. Cambridge is reminded
that compliance with reporting requirements does not guarantee that the cost of the loans or the
use of such funds will be automatically recovered in the next rate case. To the extent that these
loan funds are used for non-regulated services, any adjustment associated with non-regulated
costs will occur in a future rate case.
Cambridge has paid the fee required by Idaho Code ~ 61-905.
ORDER
IT IS THEREFORE ORDERED that Cambridge Telephone Company s Application
is granted as conditioned above.
IT IS FURTHER ORDERED that Cambridge may execute the loan documents with
the Rural Utility Service and Rural Telephone Bank.
IT IS FURTHER ORDERED that this authorization to borrow not more than
$17 500 000 is without prejudice to the regulatory authority of this Commission with respect to
rates, services, accounts, evaluations, estimates, or determination of costs, or the allocation of
costs between regulated and non-regulated activities, or any other matter that may come before
this Commission pursuant to its jurisdiction and authority as provided by law.
IT IS FURTHER ORDERED that nothing in this Order and no provision of Idaho
Code Title 61 , Chapter 9, or any act or deed done or performed in connection with this Order
shall be construed to obligate the State of Idaho to payor guarantee in any manner whatsoever
any funds authorized by the Commission.
IT IS FURTHER ORDERED that issuance of this Order does not constitute
acceptance of Cambridge s exhibits or other material accompanying the Application for any
purpose other than issuance of this Order.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case No. CAM - T -03-
may petition for reconsideration within twenty-one (21) days of the service date of this Order
with regard to any matter decided in this Order or in interlocutory Orders previously issued in
this Case No. CAM-03-Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code 9 61-
626.
ORDER NO. 29399
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this IO~
day of December 2003.
ATTEST:
~ill
D. Jewell
Commission Secretary
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ORDER NO. 29399
MARSHA H. SMITH, COMMISSIONER