20030619Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
LEGAL
COMMISSION STAFF
WORKING FILE
FROM:KATHY STOCKTON
TERRI CARLOCK
DATE:JUNE 18,2003
RE:COLUMBINE TELEPHONE COMPANY, INc. DBA TETON
TELECOM; CASE NO. COL-03-
BACKGROUND
On April 16, 2003 , Columbine Telephone Company, Inc. dba Teton Telecom Columbine
applied pursuant to Idaho Code g 61-901 for authority to execute a Loan Agreement in an
amount not to exceed $8,400 000 with the Rural Telephone Finance Cooperative (RTFe). The
Application states that the purpose of the loan is for the restructuring of the ownership of Silver
Star Telephone Company, Columbine s sister corporation.
On June 17,2003 , the Company filed Columbine Telephone Company s Petition for
Reconsideration or Clarification. The Petition states
1. Commission Order No. 29256 denied Columbine s application to
borrow an amount not to exceed $8 500 000 (sic) from the Rural
Telephone Finance Cooperative on the grounds that "it is not in the
public interest to utilize utility assets or revenues as collateral to satisfy
what is essentially a loan for a private purpose." Order No. 29256 at
2. Following the issuance of Order No. 29256, Columbine has
renegotiated the terms of the proposed loan with R TFC. As a result of
these negotiations Columbine will not be required to provide a
mortgage or other security interest on its assets to support the new loan.
Instead, RTFC has agreed to accept a security interest in Columbine
stock as collateral for the proposed loan. 87% of Columbine s stock is
owned by Teton Communications, Inc., which is in turn owned by
Hoopes Telephone Management LP. The other 13% of Columbine
stock is held by Silver Star Telephone Company.
DECISION MEMORANDUM JUNE 18, 2003
3. Section 61-901, Idaho Code, states that a utility s right "to issue
mortgages, deeds of trust or other instruments with respect to its
property situated within the state ofIdaho" is subject to the
Commission s jurisdiction and regulatory authority. It would appear
therefore, that the renegotiated loan does not require Commission
approval because it is not secured by utility assets.
4. In the alternative, if the Commission nevertheless finds that it has
jurisdiction over the proposed RTFC loan, Columbine requests that the
Commission reconsider and revoke its finding that the loan is "not in
the public interest" Because the renegotiated loan will be secured
solely by Columbine s equity ownership, it does not place the utility
assets at risk and it has no potential adverse impacts on ratepayers.
Petition at 1-
The Company requests that the Commission issue a new Order that fmds that
Commission approval of the renegotiated RTFC loan is not required, or that the renegotiated
loan is not adverse to the public interest and is therefore approved. Columbine has not requested
a hearing.
STAFF COMMENTS
Staff asserts that Commission approval of the renegotiated loan is still required. Idaho
Code g 61-901 states in pertain part that
, "
The right of every public utility. . . to issue, assume or
guarantee securities and to issue mortgages, deeds of trust or other instruments of security with
respect to its property situated within the state of Idaho, is hereby subj ected to the regulation and
supervision of the public utilities. . .." Staff believes that this renegotiated loan falls into the
issue or guarantee securities" section of Idaho Code ~ 61-901.
First, the proposed loan is being made to Columbine, a public utility. Staff previously
recommended that in order to protect customers, certain restrictions should be required on the
loan that would serve to protect utility customers. To safeguard customers, Staff proposed that
any mortgage lien be placed on non-regulated utility assets and revenues only, and that no
regulated utility property or revenues be used as security for this loan. In the alternative, Staff
indicated at the May 28, 2003 decision meeting that the stock could be pledged. The
renegotiated loan will be using the company stock as collateral rather than the mortgage lien on
the utility assets and revenues. Second, as set out in the Petition, 13% of Columbine stock is
held by Silver Star, a regulated utility, which is in turn owned by HTM. Verification of the
DECISION MEMORANDUM JUNE 18, 2003
renegotiated terms and review of final loan documents filed after closing will assure that
customers are protected with this change.
STAFF RECOMMENDATION
Staff asserts that the Commission still has jurisdiction over this security issuance. Staff
recommends that the loan be approved with the renegotiated security terms. Staff further
recommends that the Company comply with the following reporting requirements:
1. Verified copies of any Agreement entered into pursuant to this Order;
2. A copy of the RTFC's final due diligence investigation report;
3. A copy of the executed collateral documentation;
4. Copies of all annual certification, covenant reports, and letters regarding
these detenninations; and
5. Copies ofletters and approval by RTFC of any future assignment of any
portion of the loan to a subsidiary.
Staff still considers it appropriate to require the Company to meet the above reporting
requirements, were the Commission to grant the Petition for Reconsideration or Clarification.
COMMISSION DECISION
Does the Commission wish to reconsider or clarify its prior Order No. 29256?
Does the Commission find that it does or does not have jurisdiction over the renegotiated
RTFC loan?
Does the Commission wish to issue a new Order finding that the renegotiated loan is not
adverse to the public interest?
Does the Commission wish to approve the renegotiated loan with Staff s reporting
recommendations?
~~~
Joo larrlocR
Terri Carlock
udmemos\DM2 Co! RTFC
DECISION MEMORANDUM JUNE 18 2003