28200.app.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF CAMBRIDGE TELEPHONE COMPANY’S, INC. AND COUNCIL TELEPHONE COMPANY’S APPLICATION FOR AUTHORITY TO INCREASE RATES AND DISBURSEMENTS FROM THE IDAHO USF. )
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CASE NOS. CAM-T-99-2
COU-T-99-2

NOTICE OF APPLICATION

ORDER NO.  28200

On October 20, 1999, Cambridge Telephone and Council Telephone Companies filed an Application requesting that the Commission authorize a general rate increase. Cambridge is a Title 61 regulated telephone company providing service in Cambridge, Indian Valley, Cuprum and Lowman exchanges. Council is a wholly-owned subsidiary of Cambridge providing service in the Council exchange. Each Company serves approximately 1,000 access lines in their respective service areas.
In a companion Application, the Companies have requested that the Commission authorize the merger of the two companies with Cambridge as the surviving corporation. In that case (Nos. CAM-T-99-1/COU-T-99-1) they maintain that the merger is revenue neutral and will not affect the rates or charges of either Company. In the present rate case, the Companies’ Application is based upon the Companies being merged.

NOTICE OF APPLICATION
A. General
YOU ARE HEREBY NOTIFIED that the Companies maintain that since Cambridge’s last general rate case in 1987, increased competition and passage of the federal Telecommunications Act of 1996 “have transformed the telecommunications industry and dramatically impacted the economics of independent local exchange toll-free companies such as applicants.” Application at 3. The Companies propose to implement several toll-free Extended Area Service (EAS) routes, increase the rates for local service, decrease their long-distance access charges to the statewide average, and increase Cambridge’s disbursement from the state Universal Service Fund (USF). According to the Companies’ Application, they seek an increase in their combined annual revenue requirement of approximately $602,792 ($242,108 in telecommunications revenues and $360,684 in additional disbursements from the state USF.
YOU ARE FURTHER NOTIFIED that in calculating their annual revenue requirement, the Companies propose to use a capital structure comprised of 66.35% debt and 33.65% equity. The Companies request that the Commission authorize a return on equity of 13.5%. Ultimately, the Companies seek an overall rate of return on their combined rate base of 8.28%.

B. Extended Area Service
YOU ARE FURTHER NOTIFIED that presently pending before the Commission is a Petition for Extended Area Service (EAS) between Cambridge’s exchanges and other exchanges. See Case No. GNR-T-99-11. The rate case Application is based upon the assumption that the Commission will approve the requested EAS routes. The Companies are proposing EAS between and among their own exchanges and the exchanges of Midvale, Weiser, Payette, and Fruitland. The Companies are also recommending that the Commission approve EAS between Council and New Meadows. Finally, they propose that the Commission approve EAS from Lowman to Garden Valley, Idaho City and Horseshoe Bend. Several of the requested EAS exchanges are served by other telephone companies including: Citizens Utilities, U S WEST Communications, Midvale Telephone, and Farmers Mutual Telephone Cooperative. The Applicants maintain that Midvale and Farmers are agreeable to the proposed EAS but the EAS request to the U S WEST and Citizens exchanges is more problematic. Granting EAS will decrease the Companies’ revenue from long-distance access charges and shift expenses from the interstate to the intrastate jurisdiction (a shift of $128,507).

C. Rates for Local Services
YOU ARE FURTHER NOTIFIED that the Companies propose to increase existing local rates by approximately $320,000. They propose to increase the monthly residential rates for unlimited local calling for customers in Cambridge/Indian Valley, Cuprum, and Lowman from the existing rates of $15.35, $12.90, and $14.05, respectively, to a uniform monthly rate of $24.10. The parties propose increasing the rates for residential customers in Council from the existing monthly rate of $10.11 to the uniform monthly rate of $24.10. Thus, the existing monthly local residential rates for single-party customers would increase in Cambridge/Indian Valley by $8.75; in Cuprum by $11.20; in Lowman by $10.05; and in Council by $13.99. This represents increases in the residential rates for unlimited local calling ranging from 57% to 138%.
YOU ARE FURTHER NOTIFIED that the Companies also propose to increase their local monthly business rates. The monthly rates for single-line business service would increase in Cambridge/Indian Valley, Lowman, Cuprum, and Council from $25.00, $23.00, $21.00, and $26.02, respectively, to a uniform single-line business rate of $42.00 per month. Thus, the increase in monthly local business rates for single-party customers would range from 61% to 100%.
YOU ARE FURTHER NOTIFIED that the Companies also propose to increase the monthly rates for measured local service for their residential customers. Measured service customers pay a monthly flat-charge plus a per-minute usage fee. They suggest the monthly flat charge for residential measured service be increased from $5.19 to $16.00. This represents an increase in the monthly measured local residential flat-rate of 208%. The Companies apparently propose to eliminate business measured service. The Application does not disclose whether the Companies are proposing any changes to the per-minute usage charge for measured service or the amount of local calling minutes included in the monthly flat-rate service charge.
YOU ARE FURTHER NOTIFIED that the Companies also propose to adjust the rates for various other services including custom calling features, directory listing, voice mail, dialing or ringing features, and certain non-recurring charges. For example, the monthly rates for Caller ID (number only) in the Cambridge and Council exchanges are $4.95 and $2.95, respectively. The Companies propose a uniform rate for this service of $4.50 per month. The rates for Caller ID (name and number) for residential customers is $4.95 in the Cambridge exchanges and $4.50 in the Council exchange. The Companies propose a uniform rate for this service of $5.50 per month. The monthly rates for residential Call Waiting in Cambridge and Council is $3.00 and $5.00 per month, respectively. They propose to charge a uniform rate of $3.50 per month. The Companies propose to eliminate the distinction between residential and business custom calling features. The Companies also propose to increase their non-recurring charges for service order changes from $10.00 per occurrence to $12.50. The Companies also propose to increase their line connection charge from $20.00 to $25.00. If adopted, these proposed increases result in an annual revenue increase of approximately $300.00.
D. Access Charges
YOU ARE FURTHER NOTIFIED that as previously mentioned, the Companies propose to restructure and reduce their access charges to the existing statewide average. More specifically, the Companies propose to eliminate the rate differentials between peak and off-peak local transport and switching for Cambridge. They next propose to reduce the common carrier line (CCL) rate for originating traffic in the Cambridge exchange from $.01716 to a uniform rate of $.01000 per access minute. The originating CCL rate for Council would remain at $.01 per access minute.
YOU ARE FURTHER NOTIFIED that currently the Companies’ CCL rate for terminating service in the Cambridge and Council exchanges are $.01716 and $.01570 per access minute, respectively. These rates are proposed to be reduced to $.01 per access minute. The Companies also propose to adopt a uniform local transport and local switching access rates of $.02019 per access minute. This represents an increase in the Cambridge rates for local transport and switching but a decrease in the Council rates for local transport and switching. If the Commission approves the proposed changes in access rates, and the EAS routes, the Companies calculate an annual revenue deficiency caused by these changes (excluding the shift of expenses from the interstate to intrastate jurisdiction) of $118,899.

E. Other Issues
YOU ARE FURTHER NOTIFIED that Cambridge (but not Council) currently receives disbursements from the Idaho USF. In the 1998 test year, Cambridge received $413,380 in USF payments. In this case, the combined companies are requesting an increase in the annual funding from the Idaho USF in the amount of $360,684 or a total of $774,064. See Exhibit 6; Application at 3.
YOU ARE FURTHER NOTIFIED that the Companies request a waiver of the Commission’s Procedural Rule 121.01 which requires the filing of complete tariffs showing existing rates and proposed changes in legislative format. IDAPA 31.01.01.121.01(a). The Applicants maintain that the proposed rate changes are clearly delineated in the testimony and exhibit. Once the Commission issues a final Order in this case, then the Applicants will file an appropriate tariff incorporating the changes approved by the Commission.
YOU ARE FURTHER NOTIFIED that the Applicants request that the Commission consider this rate case without evidentiary hearings and instead process this matter under Modified Procedure. The Applicants also request that the Commission adopt the new rates to be “effective with bills issued on and after November 15, 1999.” Application at 4.

F. Matters at Issue
YOU ARE FURTHER NOTIFIED that the Application together with supporting testimonies and exhibits, have been filed with the Commission and are available for public inspection during regular business hours at the Commission offices.
YOU ARE FURTHER NOTIFIED that Cambridge’s and Council’s combined intrastate revenue requirement for services and every component of such services, including both rate base and expenses, are at issue in this proceeding. The Companies’ Application to increase or change their rates is merely a proposal subject to public review and Commission approval. The Commission may grant, deny, or modify the requested revenue requirement and may find that a revenue requirement different from that proposed by any party is fair, just and reasonable.
YOU ARE FURTHER NOTIFIED that the Applicants’ recurring and non-recurring rates and charges for all of their southern Idaho retail customers, including special contract customers, are at issue and every component of every existing or proposed rate and charge is at issue. The Commission may approve, reject or modify the rates and charges proposed and may find the rates and charges different from those proposed by any party are just, fair and reasonable.
YOU ARE FURTHER NOTIFIED that the Commission may approve, reject or modify existing or proposed relationships between and among rates and charges within, between or among rate groups or various customer classes. The Commission may approve, reject or modify existing or proposed relationships among and between rate groups and customer classes. The Commission may also abolish, reduce or create rate groups and customer classes and may change the relative difference among and between existing rate groups or classes of customers.
YOU ARE FURTHER NOTIFIED that the Applicants have requested that the Commission authorize several new EAS routes which if approved, may result in rate changes to the customers in the requested exchanges. The tariffs, practices, rules and regulations, services, instrumentality’s, equipment, facilities, classifications, and customer relations of the Applicants’ services are at issue and the Commission may address any of them in its Order.
YOU ARE FURTHER NOTIFIED that the Applicants have requested an increase in their disbursement from the state USF. If approved, the USF end user surcharge on local exchange service, MTS and WATS type services may change. The Commission may approve, reject or modify the USF distribution proposal.
YOU ARE FURTHER NOTIFIED that all proceedings in this matter will be conducted pursuant to the Commission’s Rules of Procedure , IDAPA 31.01.01.000 et seq.
YOU ARE FURTHER NOTIFIED that the Commission has jurisdiction over this matter pursuant to Title 61 of the Idaho Code and specifically Idaho Code §§ 61-307, 61-503, 61-507, 61-523, 61-525, 61-622, 61-623 and 62-610.

DISCUSSION AND FINDINGS
At this juncture, we take up a number of preliminary matters regarding the Companies’ Application. In their Application, the Companies request that the Commission waive the requirements of Procedural Rule 121.01(a) which generally requires that the Companies submit complete tariffs showing all proposed changes to rates and services. IDAPA 31.01.01.121.01(a). The Applicants maintain that their proposed rate changes “are clearly delineated in the testimony and exhibits. Once the Commission issues a final Order in this case, the Applicant will file an appropriate tariff incorporating the changes approved in the order.” Application at 4. The Commission Staff did not oppose the waiver.
Based upon the record before us, we find it reasonable to grant a waiver from the Commission’s Procedural Rule 121.01(a). Rule 13 allows the Commission to permit deviations from its Rules of Procedure when compliance with them is impractical or unnecessary. IDAPA 31.01.01.013. Given the assertions contained in the Application, it appears that submitting a proposed tariff in legislative format is unnecessary because of the pertinent information contained in the Applicants’ testimony and exhibits. Once the Commission has completed its review of this matter, the Applicants will be directed to file an appropriate tariff incorporating the changes approved in the Commission’s final Order.
Although the Companies’ Application was filed on October 20, they requested an effective date of November 15, 1999. Idaho Code § 61-307 provides that utilities may not change any rates, fares, charges or services “except after thirty (30) days’ notice to the commission and to the public as herein provided…. The commission for good cause shown, may allow changes without allowing the thirty (30) days’ notice herein provided for….” The Application does not specifically cite any reason why the Application should become effective on less than thirty (30) days’ notice.
The Commission’s Telephone Customer Information Rule 102 requires that a telephone company seeking a rate increase must provide notice to each customer announcing its application for a rate increase and must also send press releases to all newspapers and radio and television stations in the affected area. IDAPA 31.41.02.102. Although Rule 102.02 provides that the individual customer notice “may be mailed to customers as bill stuffers over the course of a billing cycle or may be contained in additional comment pages to the customer’s monthly bill,” the Application does not indicate that the Company has provided each customer with a notice of its general rate case. IDAPA 31.41.02.102.02. Rule 102.03 also requires that “the press release shall be delivered simultaneously [to the media outlets] with the filing of the application. A copy of the press release shall be filed with the application.” IDAPA 31.41.02.102.03. The purpose of Rule 102 is to provide effective notice to customers that the companies are seeking a general increase in their revenues. A press release was not filed in the Application and the Applicants did not seek a waiver of this requirement.
Given the complexity of the rate case, the lack of notice to affected customers, the failure to distribute and attach a press release to the Application, and the Applicant’s request that the Commission approve various EAS routes, we find it is appropriate that this Application should be suspended. Normally the suspension runs from the day that the Application is filed. However, given the facts presented here, the Commission finds that it is reasonable to suspend the Application for a period of thirty (30) days’ plus five (5) months beginning on November 20, 1999. This will provide sufficient time for the Applicants to prepare, file and distribute a press release. We believe this action is more appropriate and reasonable than rejecting the Application as deficient due to the lack of a press release. Given the magnitude of the proposed local rate increases, we further find that it would be unjust and unreasonable and contrary to Rule 102.02 to approve the increase without providing customers with appropriate notice.

DEADLINE FOR INTERVENTION
YOU ARE FURTHER NOTIFIED that persons desiring to intervene in this matter for the purpose of presenting evidence or cross-examining witnesses at hearing must file a Petition to Intervene with the Commission pursuant to this Commission’s Rules of Procedure 72 and 73, IDAPA 31.01.01.072 and -.073. Persons intending to participate at the hearing must file a Petition to Intervene within fourteen (14) days from the service date of this Order. Persons desiring to present their views without parties’ rights of participation and cross-examination are not required to intervene and may present their comments without prior notification to the Commission or the parties.

O R D E R
IT IS HEREBY ORDERED that persons desiring to intervene in this matter shall do so no later than fourteen (14) days after the service date of this Order.
IT IS FURTHER ORDERED that the Applicants are granted a waiver from our Procedural Rule 121.01 which generally requires the filing of complete tariffs showing all proposed changes in rates.
IT IS FURTHER ORDERED that the Applicants’ request that the Commission approve the Application on less than 30 days’ notice is denied.
IT IS FURTHER ORDERED that the proposed changes in rates, services and USF distribution contained in this Application shall be suspended for a period of thirty (30) days plus five (5) months from November 20, 1999, or until such earlier time as the Commission may issue an Order accepting, rejecting or modifying the proposals contained in the Application.

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of November 1999.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Myrna J. Walters
Commission Secretary

vld/OCAM-T-9COU-T-99-2_dh

NOTICE OF APPLICATION
ORDER NO. 28200 1

Office of the Secretary
Service Date
November 8, 1999