20040428Final Order No 29485.pdf

Office of the Secretary
Service Date
April 28, 2004
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF DIRECT COMMUNICATIONS
ROCKLAND, INc. FOR AUTHORITY TO
BORROW UP TO $3,277 778 FROM THE
RURAL TELEPHONE FINANCE
COOPERATIVE.
ORDER NO. 29485
CASE NO. DCM-O4-
On March 29, 2004, Direct Communications Rockland, Inc. (Rockland) filed an
Application requesting authority to borrow up to $3 277, 778 from the Rural Telephone Finance
Cooperative (RTF C) pursuant to Title 61 , Chapter 9. Idaho Code 9 61-901 requires telephone
corporations like Rockland to obtain the Commission s approval before they issue or assume any
securities or debt. Rockland is a Title 61 telecommunications provider and serves more than
000 customers in southeastern Idaho. Idaho Code 9 61-121.
The proposed financing would be structured into two loans. First, an R TFC first
mortgage loan of $1 777 778. This first mortgage loan is a IS-year loan maturity with the first
mortgage lien shared with the Rural Utilities Service. This mortgage loan would be used to
refinance interim financing for system improvements and to purchase the required subordinate
Certificate equal to 10% of the loan proceeds.
The second portion of the financing is a interim line-of-credit up to $1 500 000. The
line-of-credit will be used from time to time as necessary to fund system improvements and
acquire upgraded facilities. The ultimate purpose of the two loans is to upgrade
telecommunication services and to offer broadband services to both business and residential
customers. The interest rate on the two loans will be at RTFC's then current market rate at the
time loan advances are made. We approve the Application as conditioned below.
STAFF RECOMMENDATION
As indicated in the Company s Application, a major portion of these loan funds will
be used for broadband services to business and residential customers along with fiber optics for
regulated and non-regulated services. As has been the case with other telephone companies
Staff reported that it was concerned about obligating regulated assets and operating revenues to
secure financing for non-regulated activities. Despite this misgiving, Staff recommended that the
ORDER NO. 29485
Commission approve the loan request. Staff noted that any adjustment associated with the non-
regulated costs or proceeds of the loans will occur in Rockland's future rate cases. To monitor
any loan covenants required, Staff also recommended adopting the following requirements:
(1) Provide copies of the RTFC final loan approval documents including
documentation for advances;
(2) Provide a copy of any executed collateral documentation;
(3) Provide copies of all annual certification, covenant reports, and letters
regarding these determinations; and
(4) Provide a report showing amounts advanced, terms of issue, purpose of
issue and any covenants or other restrictions.
FINDINGS OF FACT
1. The Commission has jurisdiction over Direct Communications Rockland, Inc. and
this Application pursuant to Idaho Code, Title 61 , Chapters 1 and 9.
2. Rockland requests the Commission grant it authority to borrow $3 277 778 from
the Rural Telephone Finance Cooperative (RTFC). This amount would be divided between two
loans. First is a first mortgage loan of $1 777 778 with a term of 15 years. The second portion
of the loan is to establish a line-of-credit up to $1 500 000.
3. The Commission finds that the proceeds ofthe proposed loan will be used for and
will partially reimburse Rockland's general fund used to make system improvements and acquire
upgraded facilities. In addition, the Commission further finds that the proposed loans will be
used to offer business and residential customers a variety of broadband services.
4. All fees have been paid by Rockland in accordance with Idaho Code 9 61-905.
CONCLUSIONS OF LAW
Direct Communications Rockland is incorporated under the laws of the State of
Idaho and is duly authorized to do business in this State in connection with its utility operations.
The Commission has jurisdiction over Rockland and this Application.
The proposed loan to be issued to Rockland by the R TFC is for a lawful purpose and
is within Rockland's corporate powers. The proposed transaction is in the public interest. A
formal hearing on this matter would serve no public interest.
ORDER NO. 29485
The Commission approves this Application, conditioned on the same restrictions and
filing requirements as required by the RTFc. Rockland shall provide the Commission with
copies of all final loan documents, all advance documents, all collateral documentation and all
other RTFC required filings as they are completed. Moreover, Rockland shall also file annual
statements reflecting total balances outstanding, current certifications, mortgage compliance
calculations, and covenant reports and lender letters.
All fees have been paid by Rockland in accordance with Idaho Code 9 61-905.
ORDER
IT IS HEREBY ORDERED that the Application of Direct Communications
Rockland, Inc. to borrow up to $3 277 778 from the Rural Telephone Finance Cooperative
(RTFC) is granted, conditioned upon the same restrictions and filing requirements, if any, as set
by the RTFC.
IT IS FURTHER ORDERED that Rockland shall file copIes of the following
material with the Commission:
(1) Provide copies of the RTFC final loan approval documents including
documentation for advances;
(2) Provide a copy of any executed collateral documentation;
(3) Provide copies of all annual certification, covenant reports, and letters
regarding these determinations filed with the RTFC; and
(4) Provide an annual report showing amounts advanced, terms of issue
purpose of issue and any covenants or other restrictions.
IT IS FURTHER ORDERED that nothing in this Order shall be construed to obligate
the State of Idaho to payor guarantee in any manner whatsoever any security authorized, issued
assumed or guaranteed under the provisions of this Order. Idaho Code 9 61-906.
IT IS FURTHER ORDERED that this authorization is without prejudice to the
regulatory authority of this Commission with respect to rates, services, accounts, evaluations
estimates, or determination of costs, or any other matter which may come before this
Commission pursuant to its jurisdiction and authority as provided by law.
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. DCM- T -04-
ORDER NO. 29485
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. DMC- T -04-2. 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.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this :J
f1'
day of April 2004.
~ENT
MARSHA H. SMITH, COMMISSIONER
Commissioner Hansen Dissents - see attached
DENNIS S. HANSEN, COMMISSIONER
ATTEST:
ill 1dfwell
Commission Secretary
bls/DCMT0402 dh
ORDER NO. 29485
DISSENTING OPINION OF
COMMISSIONER DENNIS S. HANSEN
CASE NO. DCM-O4-
ORDER NO. 29485
As noted in the majority opinion, a large portion of Rockland's RTFC loan will be
used to deploy broadband facilities to support both regulated and non-regulated services. My
concern in this case is that regulatory assets and operating revenues will be pledged to secure
financing for non-regulated activities. If loan defaults were to occur (however remote), then the
regulatory assets - and possibly the revenues associated with those assets - could be
appropriated to satisfy the loan. For this reason, I respectfully dissent.
fl-z DENNIS S. HANSEN, COMMISSIONER