HomeMy WebLinkAbout28430.docBEFORE 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
GNR-T-99-11
ORDER NO. 28430
On October 20, 1999, Cambridge Telephone Company and Council Telephone Company filed a Joint Application requesting that the Commission authorize a general rate increase. More specifically, the Companies proposed to implement several toll-free extended area service (EAS) routes, increase the rates for local telephone service, and decrease their long-distance access charges. The Companies serve approximately 2,000 customers in the communities of Cambridge, Council, Indian Valley, Cuprum, and Lowman. On April 20, 2000 and May 18, 2000, the Commission convened a public hearing in Cambridge and a technical hearing in Boise, respectively. After reviewing the public comments, the testimony of the parties, and the record in this case, the Commission grants the Joint Application as set out in greater detail below.
BACKGROUND
A. The Application
In their Joint Application, the Companies (hereinafter Cambridge or Company) initially sought an increase in its annual revenue requirement of approximately $603,000. Cambridge proposed to increase local telephone rates by $242,000 and sought to increase its disbursements from the Idaho Universal Service Fund (USF) by $361,000. The additional revenue would offset the costs of implementing the EAS routes and lowering access charges.
1. EAS Routes. As part of its rate case, Cambridge proposed to implement EAS between and among the exchanges of Midvale, Weiser, Payette and Fruitland. The Company also recommended that the Commission approve EAS between Council and New Meadows. Finally, it proposed that the Commission approve EAS from Lowman to Garden Valley, Idaho City, and Horseshoe Bend. Cambridge acknowledged that several of the requested EAS exchanges are served by other telephone companies including: Citizens Utilities, U S WEST, Midvale Telephone, and Farmers Mutual Telephone Cooperative. In its Application, Cambridge maintained that Midvale and Farmers are agreeable to the proposed EAS routes but acknowledged that the EAS request to the U S WEST and Citizens exchanges are “more problematic.” Order No. 28200 at 2.
2. Local Rates. As set out in greater detail in Order No. 28200, Cambridge proposed to increase its existing local rates. More specifically, the Company proposed increasing the rates for residential local service to a uniform monthly rate of $24.10. The proposed residential rate represents an increase in current rates ranging from 57% to 138%. The Company also proposed to increase its rates for local business service to a uniform single-line business rate of $42.00 per month. The proposed increase in monthly rates for single-line business customers represents an increase in current rates ranging from 61% to 100%. The Company next recommended an increase in its flat rate charge for residential measured service to a uniform $16.00 per month. Customers subscribing to measured service would also pay a per-minute usage fee of $.03 per minute once the customer exceeds 90 minutes of local calling per month. Finally, the Company proposed to adjust the rates for various other services including custom calling features, directory listings, voice mail, and certain non-recurring charges. See Order No. 28200 at 3; Cambridge Exh. 7 and 8 (revised).
3. Access Charges. Cambridge also proposed to reduce its access charges to the existing statewide average. More specifically, the Company proposes to reduce its carrier common line (CCL) charge for originating traffic in the Cambridge exchanges from $.01716 to a uniform rate of $.010 per access minute. The Company also proposes to reduce the terminating CCL charge to $.01 per access minute. See Cambridge Exhibit 7 (revised).
4. USF Revenues. As part of its Application, Cambridge also sought an increase in its USF disbursements. Currently, Cambridge receives approximately $413,000 in annual USF payments. The Company initially requested an increase in its annual USF payments of $360,000, or a total annual USF disbursement of approximately $773,000.
B. Procedural History
On December 8, 1999, the Company filed revised prefile testimony. In its revised testimony, the Company withdrew its request for increased disbursements from the state USF. Instead, Company witness Ray Hendershot’s revised prefile testimony stated that Cambridge can decrease its existing annual draw from the Idaho USF by $13,979 per year. This adjustment reduced the annual revenue request to an increase of about $228,000, or $375,000 less than originally requested.
On February 17, 2000, the Commission convened a prehearing conference in this matter. At the prehearing conference, the following parties entered appearances: Cambridge Telephone, U S WEST Communications, Citizens Telecommunications Company of Idaho, and the Commission Staff. Although AT&T Communications was granted intervenor status in Order No. 28225, it did not enter appearance at the prehearing conference. Following the prehearing conference, the Commission issued Order No. 28295 dated March 29, 2000, setting this matter for hearing. The Commission scheduled a public hearing in Cambridge and a subsequent technical hearing in Boise.
C. The Stipulation
On March 29, 2000, Cambridge and the Commission Staff filed a Motion urging the Commission to adopt a Stipulation and Settlement Agreement entered into between the two parties. The parties maintained the Stipulation represents a settlement of all outstanding issues between the Staff and Cambridge. The parties agreed that EAS should be implemented as proposed by the Company in its Application with the addition of another EAS route between the Lowman exchange and the Boise exchange. The parties also stipulated that measured service should not be offered in the Lowman exchange. The parties also asserted that the proposed increases in local rates and the decreases in access charges were appropriate and reasonable. Settlement at 2-3.
The parties also agreed to new depreciation rates and recommended that the Commission adopt such rates retroactive to January 1, 1999. Id. at 3 and Exh. A. Finally, the parties agreed that Cambridge’s existing USF draw should be decreased by $246,000 per year contemporaneously with the implementation of the EAS routes and the proposed increase in local service rates. Id. at 3.
The Staff maintained that its investigation and audit into the Company’s financial records revealed that the implementation of EAS, the proposed increase in local service rates, the recommended reduction in access charges and with the reduction in USF disbursements, does not produce excessive earnings to the Company. Consequently, the parties recommended that the Commission adopt the Stipulation and Settlement as a reasonable resolution of this case.
THE HEARINGS
A. The Public Hearing
The Commission convened its public hearing in this matter on April 20, 2000 in Cambridge. Following a brief presentation by the Commission Staff and Cambridge, the Commission took the testimony of seven public witnesses. Four witnesses expressed concerns regarding the proposed substantial increase in residential rates. Two witnesses indicated that they live on limited or fixed incomes. When asked, they both expressed an interest in finding out more about residential measured service and about the availability of assistance from the Idaho Telecommunications Service Assistance Program (ITSAP). Tr. at 13, 15-16, 23-24.
Two other witnesses expressed interest in the possibility of expanding the requested local calling area to include Boise. One public witness stated that expanding EAS to include Boise might provide toll-free access to additional Internet service providers. However, when asked whether she would be willing to pay the estimated $8.00 additional cost per month to obtain the EAS to Boise, she expressed reservation. Tr. at 38. Two other witnesses testified that they do not make long-distance phone calls and suggested that the expanded EAS calling would offer them little value in comparison to the proposed increase in local rates.
B. The Technical Hearing
The Commission convened its technical hearing on May 18, 2000. Cambridge, U S WEST, Citizens, and the Staff presented witnesses and were represented by counsel. Although AT&T was granted intervention in this case, it did not enter an appearance or present evidence at the technical hearing.
1. EAS Routes. Following the filing of the Stipulation and prior to the technical hearing, the parties continued to discuss the possibility of settling the issue of inter-company EAS routes in this proceeding. Pursuant to these discussions, Citizens’ witness Lance Tade testified that Citizens agrees to the proposed EAS routes (including Lowman to Boise) and recommended the Commission add Lowman to Citizens’ optional regional calling plan approved in Case No. CTC-T-98-3 (Order No. 27789). Tr. at 93. Citizens’ witness Tade proposed to modify the Company’s approved local calling plans by removing the EAS routes from the Citizens exchanges of McCall, Cascade, Donnelly and Whitebird to the Cambridge exchange of Council. Tr. at 95. Citizens’ New Meadows and Riggins customers would still be able to call into Council under the optional local calling plan. Id.
Mr. Tade also proposed to modify Citizens other optional local calling plan by adding the Cambridge exchange of Lowman to the local calling area of Garden Valley, Horseshoe Bend and Sweet. Tr. at 95-96; Citizens Exh. 203. Mr. Tade testified that the EAS changes agreed to by Citizens, the Commission Staff and Cambridge would not result in any price changes to the Citizens’ calling plans. Tr. at 96. Although authorized, Citizens’ has not implemented its optional local calling plans because the Company has been waiting until the Commission ruled upon the proposed EAS routes in this case. Tr. at 102.
Cambridge’s Vice President Richard Wiggins also agreed with the Citizens modifications and urged the Commission to adopt the parties’ revised EAS routes. He testified that there is a strong community of interest and considerable public support to adopt the proposed EAS routes. Tr. at 58. He also indicated that “granting EAS will soften the blow” of the substantial rate increases. Tr. at 54. He said Cambridge could implement the extended area service “probably within 30 days.” Tr. at 58.
Although Cambridge had not initially contemplated EAS between its Council exchange and Citizens’ Riggins exchange, Mr. Wiggins did not object so long as there was not a significant revenue impact. Tr. at 59. The Company asked and received permission to advise the Commission whether its proposed local service rates or the stipulated reduction in the USF disbursement might need to be adjusted to reflect the proposed Riggins to Council EAS route. Tr. at 59. In a letter dated May 23, 2000, the Company determined that the traffic between Council and Riggins was insignificant and concluded that it would not be necessary to amend the proposed USF reduction identified in the Stipulation entered into between Cambridge and the Staff.
Testifying for U S WEST, John Souba stated that U S WEST had no objection to the proposed EAS routes so long as the Commission finds that they are in the public interest. Tr. at 176. Although he supported implementing EAS, Mr. Souba recommended that the Cambridge exchanges be granted EAS to the entire U S WEST Treasure Valley local calling region. Tr. at 202. He indicated that if the requested “limited” EAS routes were granted, the companies and the Commission will face additional petitions in the future from customers in these exchanges for inclusion in the whole Boise area EAS region. Tr. at 178. He also asserted that granting limited EAS “invites EAS arbitrage.” Tr. at 180.
Mr. Souba testified that if the Commission were to grant the initially requested EAS routes, U S WEST’s annual costs for implementing EAS would be approximately $56,500. Tr. at 194. He calculated that this would result in a one (1) cent increase to local service rates for U S WEST customers in the three local calling regions. Id. Adding one cent to the local in-region rate increase would make the existing U S WEST in-region rate for residential customers $17.46. Tr. at 200. Conversely, if the Commission were to approve EAS to the entire Boise area U S WEST EAS region, the actual increase to U S WEST residential customers in the local calling regions would be approximately four (4) cents per month or a monthly rate of $17.49. He testified that U S WEST would be able to provide the Commission with an “implementation date” within 21 days after receiving the Commission’s Order in this proceeding. Tr. at 198.
Staff witness Wayne Hart also supported the implementation of the revised EAS routes. Tr. at 129. After examining the various EAS standards established by the Commission in Order No. 26311, he concluded that the proposed EAS routes meet the community-of-interest standards identified by the Commission. Tr. at 132-142. He also supported providing Lowman customers with EAS calling to the Boise exchange. He testified that providing Lowman customers with access to Boise County and Boise City exchanges provides sufficient access to a range of goods and services enjoyed by most Idahoans. Tr. at 158-59. He also testified that the $222,000 cost of implementing EAS would nearly equal the revenue generated by the proposed increases in local rates. Tr. at 144. If the EASs were approved, he estimated that U S WEST would be entitled to approximately $60,000 in additional annual revenue. Tr. at 160. This equates to a monthly increase for all U S WEST regional local calling customers of approximately $0.016 or two (2) cents for billing purposes. Id.
Mr. Hart did not support U S WEST’s recommendation to expand the EAS requests to include the entire U S WEST Treasure Valley local calling region. He calculated that if EAS were granted to the entire U S WEST region it would result in costs of approximately $400,000 or about $175,000 more than agreed to by Citizens, Cambridge and the Staff. Tr. at 145. He calculated that local residential rates would have to be increased by $18.00 per line per month to recover the costs but he believed that customers would be unwilling to pay an increase of this proportion. Id. He further stated it would be inappropriate to recover this cost of expanding EAS to the entire Treasure Valley from the Idaho USF. Increasing disbursements from the USF “would result in ratepayers throughout the state seeing increases in their bills in order to expand the calling area for these customers.” Tr. at 146.
Staff witness Hart dismissed U S WEST’s concern that not granting EAS to the entire U S WEST Treasure Valley Region would lead to “toll bridging” or “arbitrage.” While he recognized that arbitrage could occur, he testified that it should not be a significant factor. He stated that U S WEST has “ample authority to take the necessary actions against any instance of arbitrage that they discover. In addition, I believe there is little economic incentive for arbitrage for routes included in the Staff and Company stipulation.” Tr. at 148.
At the conclusion of the technical hearing, U S WEST asked that the record remain open until May 30, 2000 so that it might respond, if necessary, to Citizens’ supplemental testimony regarding the EAS routes. Tr. at 208-209. U S WEST did not offer any supplemental evidence. Consequently, the Commission considers the record in this matter closed.
Commission Findings: At the hearing, Cambridge, Citizens and the Staff reached agreement regarding the configuration of the EAS routes and urged us to authorize their implementation. U S WEST did not oppose such a request. In considering the implementation of EAS the Commission examines the community-of-interest standards set out in our Order No. 26311 and the costs of such implementation. Company witness Hendershot testified that all of Cambridge’s customers “will have toll-free access to their schools, county governments, public safety agencies, primary shopping areas, and the like. In addition, the traffic studies show a relatively widespread interest in calling between the listed exchanges.” Tr. at 69. After reviewing the community-of-interest standards, and the agreement among the parties, we find that it is reasonable to implement EAS as proposed by Cambridge, Staff and Citizens.
We next turn to U S WEST’s recommendation that EAS be extended to the entire U S WEST Treasure Valley local calling region. The Commission Staff and Cambridge objected to U S WEST’s recommendation. Staff witness Hart testified that approving the requested EASs short of the entire U S WEST local calling region provides customers with sufficient access to a range of goods and services to meet the Commission’s community-of-interest standards. In addition, he testified that Cambridge customers would not support the rate increase necessary to fund its cost. Likewise, Cambridge witness Hendershot opposed U S WEST’s recommendation for similar reasons. In addition, he stated that only a relative small number of customers would benefit by including the entire Treasure Valley calling region. Tr. at 69-70.
The Commission finds that the evidence in this proceeding does not support a finding that there exists a community-of-interest to expand the proposed EAS routes to include the entire U S WEST Treasure Valley local calling region. The Commission finds it is not in the public interest to impose EAS to a larger area than warranted by our community-of-interest standards.
The Commission is also not swayed by U S WEST’s assertion that granting limited EAS will create unacceptable risks for toll bridging or arbitration. We agree with the testimony of Staff witness Hart that U S WEST and any other affected company have ample authority to take action against any instance of arbitrage that they discover. Tr. at 148. As the Commission has previously concluded in the Upper Valley case, EAS arbitrage is “inappropriate and unlawful.” See Order No. 24885 (Case No. GNR-T-94-1).
2. Local Rates and Access Charges. As set out in their Stipulation and Settlement Agreement, Cambridge and Staff recommended the Commission increase monthly residential and business rates to $24.10 and 42.00, respectively. Given the implementation of EAS and the reduction of access charges, the parties urged us to find the proposed service rates are just and reasonable. Stipulation at 2-3; Tr. at 58, 159. The parties also urged the Commission to reduce and adjust Cambridge’s access charges to the statewide average. Stipulation at 3; Cambridge Exh. 7 (revised).
The parties also agreed to adjust rates for custom calling and non-recurring charges. Id. For example, the charge for residential Caller ID (number only) is currently $4.95 per month in the Cambridge exchanges and $2.95 in the Council exchange. The Company proposes to charge uniform rates of $4.50 per month. The Company also proposes to increase its rate for residential Caller ID (name and number) in the Cambridge exchanges from $4.95 to $5.50. Finally, the Company proposes to adjust its rates for residential call waiting from $3.00 for Cambridge and $5.00 for Council to a uniform monthly rate of $3.50. Cambridge Exh. 8 (revised).
Commission Findings: We begin our examination of the Stipulation and Settlement entered into by Cambridge and the Staff by observing that we are not bound by the parties’ settlement. The parties carry the burden of adequately demonstrating that the Settlement is reasonable and in the public interest. IDAPA 31.01.01.275. Having reviewed the parties’ testimony, the terms of the Settlement and the public testimony, we find that the proposed increases and adjustments of local service rates to be fair and reasonable. As Staff witness Hart stated an increase in local service rates was necessary for Cambridge to maintain its eligibility for USF disbursements. Tr. at 67. Moreover, the parties maintained that the increase in local service rates were necessary to help defray the costs of implementing EAS.
We next turn to the issue of access charges. We find that the proposed reduction in access rates is reasonable and in conformance with access rate reductions implemented by other companies.
Finally, having reviewed the rate adjustments proposed by the Company and the Staff in their Stipulation for its custom calling features, we find such adjustments to be just and reasonable. Given these changes, we believe that it is appropriate for the Company to notify its customers of these rate adjustments prior to the effective date of the new rates.
3. Measured Service. In their Stipulation, the parties also recommended that measured local service be offered only to residential customers. Proposed rates for residential measured service includes a flat-rate element of $16.00 per month, including 90 minutes of free usage, plus $.03 per minute for all usage in excess of 90 minutes. The parties urged us to prohibit the mixing or combining of flat-rate and measured rate service and that measured service not be offered in the Lowman exchange. Stipulation at 3. As Staff witness Hart pointed out in his testimony, the majority of the Lowman customers are part-time occupants; “probably over 75%.” Tr. at 161. Offering these customers measured service may adversely affect Cambridge’s revenue requirement. He noted that the Commission has previously limited the availability of measured service in the Rural Telephone case last year in Order No. 28114 at 10.
Staff witness Judy Stokes also testified in support of the stipulated local measured service option. She testified that measured service should not be offered to customers in the Lowman exchange. Tr. at 121. She recommended that the Commission direct Cambridge to waive the charge from switching to flat-rate to measured service for 60 days after the Company notifies customers of the rate changes. Tr. at 121. She further recommended that Cambridge Telephone be required to advise all of its customers of the pending rate changes and the availability of their option, and to waive the non-recurring charge for switching services for 60 days. Id. She also noted that the Idaho Telephone Service Assistance Program (ITSAP) is available for eligible low-income residential customers. This program provides a billing credit of up to $10.50 per month for flat-rate, unlimited or measured local calling.
Commission Findings: We also adopt the parties’ recommendations regarding measured service. As we have stated in previous Orders, the purpose of measured service is to offer a less expensive alternative to flat-rate service to those customers who are able to limit their local calling. See Order No. 27538 at 7. In this instance, we find that the proposed rates for residential measured service carries an equitable share of the costs incurred in providing this service and maintains a reasonable relationship between flat-rate and measured service charges. We also adopt the parties’ recommendations that measured service should only be offered to residential customers, that customers be prohibited from mixing flat and measured service at a single premise, and that measured service will not be offered in the Lowman exchange. Given the unique fact that the majority of Lowman customers are not full-time residents, we agree that offering these customers measured service—especially with the implementation of EAS between Lowman and Boise—may adversely affect Cambridge’s revenue requirement. Consequently, residential measured service will not be available to customers in the Lowman exchange.
As previously mentioned, measured service could help to mitigate the substantial rate increases approved by this Order. The Idaho Telephone Service Assistance Program (ITSAP) can also help mitigate residential rate increases for eligible customers. To ensure that customers are aware of these two service alternatives, the Company shall include information about these two alternatives when it notifies customers of the impending rate increases and the implementation of EAS. In addition, we shall require the Company to waive its non-recurring charge for switching from flat-rate to measured service and vice versa for a period of 60 days from the date of implementation of EAS and the new rates.
4. USF Revenue and Depreciation. In the Cambridge and Staff Stipulation, the parties agreed that Cambridge’s USF disbursements could be reduced by $246,000 per year contemporaneously with the implementation of EAS and the rate changes for telecommunication services. Stipulation at 3, Att. A. At the technical hearing, both the Company and Staff supported the reduction in USF disbursements. Tr. at 58, 166. In their Stipulation, the parties observed that the rate increases and the reduction in USF revenues “do not produce excessive earnings” for Cambridge. Stipulation at 3. The parties also urged us to approve new depreciation rates for Cambridge retroactive to January 1, 1999. Id., Exh. A.
We adopt the parties’ Stipulation to reduce Cambridge’s annual USF payments by $246,000. We find that such a reduction is reasonable based upon the parties’ Stipulation and our review of the record. Given the agreement of the parties, we find that it is appropriate to adopt the new depreciation rates contained in the parties’ Stipulation and Settlement Agreement retroactive till January 1, 1999. We find that the adjusted depreciation rates are reasonable and appropriate. See Idaho Code § 61-525.
O R D E R
IT IS HEREBY ORDERED that the Stipulation and Settlement Agreement entered into between the Commission Staff and Cambridge Telephone is adopted. Cambridge, Midvale, Citizens and U S WEST shall implement the EAS routes described in this Order.
IT IS FURTHER ORDERED that Order No. 27789 addressing the Citizens’ optional calling plan in Case No. CTC-T-98-3 is hereby amended to conform to the EAS routes authorized in this Order.
IT IS FURTHER ORDERED that Cambridge file tariffs in conformance with the rates approved in this Order and identified in Exhibits 7 and 8 (revised). Cambridge shall be authorized to collect the new tariffed rates when the Companies are able to implement EAS and 60 days after Cambridge notifies its customers of the impending rate changes.
IT IS FURTHER ORDERED that Cambridge, U S WEST and Citizens advise the Commission within 14 days of the date of this Order as to the date(s) when they can implement the EAS routes and options approved in this Order.
IT IS FURTHER ORDERED that Cambridge notify its customers of the approved EAS routes, the rate changes approved in this Order, and the availability of residential measured service (except in Lowman) and ITSAP assistance. Cambridge shall waive its non-recurring service charge to change services for a period of 60 days from the date it implements the new EAS routes and the new service rates.
IT IS FURTHER ORDERED that Cambridge is authorized to adopt those new depreciation rates as identified in Exhibit A to the Stipulation and Settlement retroactive to January 1, 1999.
IT IS FURTHER ORDERED that at such time as the Company is able to implement EAS and collect its new rates, disbursements from the Idaho Universal Fund will be proportionally reduced by $246,000 per year.
IT IS FURTHER ORDERED that this decision resolves the Petition for EAS at issue in GNR-T-99-11. The Commission will initiate a separate proceeding to address the requests for EAS to Ontario, Oregon.
IT IS FURTHER ORDERED that U S WEST may recover its costs of implementing the authorized EAS routes in this Order based upon the method approved by the Commission in Order No. 27633.
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 these Case Nos. CAM T 99-2, COU-T-99-2 and GNR-T-99-11 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 these Case Nos. CAM-T-99-2, COU-T-99 2 and GNR-T-99-11. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of July 2000.
DENNIS S. HANSEN, PRESIDENT
MARSHA H. SMITH, COMMISSIONER
PAUL KJELLANDER, COMMISSIONER
ATTEST:
Barbara Barrows
Assistant Commission Secretary
Vld/O:CAM-T-99-2, COU-T-99 2 and GNR-T-99-11_dh
In a separate proceeding, the Commission approved the merger of Cambridge Telephone and Council Telephone into a single entity with Cambridge as the surviving corporation. See Order No. 28239.
This proposed EAS route was to just the U S WEST Boise exchange, not to U S WEST’s entire Boise local calling region.
As originally approved by the Commission, the Citizens’ local calling plans would provide optional toll-free calling among the Citizens’ exchanges of Garden Valley, Horseshoe Bend, and Sweet to Cambridge’s Lowman exchange. Another Citizens plan would provide EAS from Citizens’ New Meadows, Riggins, Whitebird, Donnelly and McCall exchanges to Cambridge’s Council exchange. Tr. at 100.
This excludes customers in Ketchum and Hailey.
ORDER NO. 28430 1
Office of the Secretary
Service Date
July 10, 2000