20080415_2218.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER RED FO RD
COMMISSIONER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:GRACE SEAMAN
DATE:APRIL 11, 2008
RE:2007 IDAHO TELEPHONE SERVICE ASSISTANCE PROGRAM ANNUAL
REPORT; CASE NO. GNR- T -08-
BACKGROUND
The Idaho Telephone Service Assistance Program (ITSAP) was established by the Idaho
Department of Health and Welfare to provide income-eligible recipients with a reduction in costs of
telecommunications services. The ITSAP program maximizes federal "lifeline" and "link-up
contributions to Idaho s low-income customers. Idaho Code ~ 56-901. Telephone companies
provide assistance in the form of a monthly discount of $3 .50 to eligible subscribers of residential
basic local exchange service. Idaho Code ~ 56-902.
To be eligible for the ITSAP program, an applicant must be the head of a household and meet
narrowly targeted eligibility criteria established by the Department of Health and Welfare. Idaho
Code ~ 56-903. The Idaho Public Utilities Commission determines a uniform statewide monthly
surcharge on each end user s business, residential and wireless access service. The surcharge must be
an amount sufficient to reimburse each telephone company for the total amount of telephone
assistance provided as well as the company s and the administrator s expenses of administering the
plan. Idaho Code ~ 56-904.
THE 2007 ANNUAL REPORT
On March 3, 2008, the Idaho Telephone Service Assistance Program (ITSAP) Administrator
Alyson Anderson, filed the annual report for the fiscal year ending December 31 , 2007. In general
2007 saw a drop in local access lines, an increase in wireless lines, and a slight decrease in the
DECISION MEMORANDUM - 1 -APRIL 11 , 2008
number of ITSAP recipients. Ms. Anderson reported gross revenues from surcharges of $1 , 144 820
of which $464 737 (41%) was assessed on local exchange services and $680 083 (59%) was assessed
on wireless services. Additional revenue for 2007 included accrued interest of $27 322 from
Treasury notes and a Merrill Lynch CMA-Government Securities Fund. Total fund amount collected
with the surcharges and interest for 2007 was $1 172 142.
The 2007 average number of ITSAP recipients per month (30 448) decreased by 5% from
2006 (32 025). Disbursement credits for eligible subscribers did not show a corresponding decrease
due to reporting delays by some telephone companies. Instead, disbursement remained almost
identical at $1 324 118, compared to $1 323 371 in 2006, and disbursements for telephone company
administrative costs increased by 11 % to $130 673. This increase in administrative costs is primarily
due to the additional reports received by new wireless companies.
The ITSAP Administrator s fees and expenses were $12 168 for the year. These expenses
included bank charges and audit fees. The fund's cash balance at the end of the year was reported at
$51 344. In March 2007 the ITSAP fund had $400 000 in U.S. Treasury notes mature (purchased in
March 2007 at 4.58% interest rate), and in April 2007 Ms. Anderson repurchased $400 000 in U.
Treasury notes with a maturity date of March 31 , 2008 and a interest rate of 4.67%.
The average number of local access lines per month reported to the Administrator for 2007
decreased by 6% to approximately 637 477 from 686 800 in 2006. The average number of wireless
access lines per month increased by almost 11 % to approximately 1 081 000 from 855 400 in 2006.
The total number of lines per month increased overall by nearly 176 277 (11 %) to approximately
718,477 from 1 542 200.
2008 BUDGET AND TRENDS
Ms. Anderson projected the funding requirement for 2008 to be $1 373 295. The number of
local access lines is expected to decrease by 6%, the number of wireless lines is expected to increase
by 11 %, and the number of ITSAP recipients is expected to decrease from an average of 30,448 per
month to 29 306. The estimated ITSAP recipient reimbursement is expected to be approximately
230 852 and the ITSAP expenses are estimated to be $142 543 for costs associated with
administration ofthe ITSAP program ($130 543 for telephone company administrative costs and
$12 000 for ITSAP Administrator s costs). The surcharge revenue received from local access and
wireless telephone companies, at the current rate of$0., is estimated to be $1 237,402. With the
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2007 end-of-year cash balance of $51 ,344, treasury bond investment of 400 000, and the interest
accrual of$I9 250, the 2008 year-end cash balance is estimated to be $334 601 , an amount sufficient
to provide a four-month reserve.
ADMINISTRATOR'S 2008 FUNDING RECOMMENDATIONS
Based upon the estimated 2008 budget, Ms. Anderson believes adequate ITSAP funding will
be supported by maintaining the current surcharge rate of $.06 per line. She, therefore, recommends
no changes to the ITSAP monthly rate for 2008. The current surcharge rate of $0.06 combined with
the investments in u.S. Treasury notes that matured in March, 2008, and the 2007 year-end cash
balance would result in a 2008 year-end fund balance of approximately $334 600. This fund balance
will provide an adequate four-month reserve.
STAFF RECOMMENDATION
Staff agrees with Ms. Anderson s assessment that the 2007 monthly ITSAP surcharge rate
should remain at the current $0.06 per line. In addition, the four-month reserve provides adequate
funding to adjust to potential demands on the program by new companies who may become eligible
to receive ITSAP reimbursements.
COMMISSION DECISION
1. Does the Commission wish to maintain the monthly Idaho Telephone Service Assistance
Program surcharge rate of $0.06 per line as adopted in Order No. 302897
2. Does the Commission wish to accept the annual report and adopt the Administrator
budget for 20087
3. Does the Commission wish to change the surcharge distribution or the methodology in
some other way7
ffi~~
Grace Seaman
i:udmemost2007 Annual Report.doc
DECISION MEMORANDUM - 3 -APRIL 11 , 2008