20100405_2909.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KEMPTON
COMMISSIONER SMITH
COMMISSION REDFORD
LEGAL
WORKING FILE
FROM:GRACE SEAMAN
DATE:APRIL 2, 2010
RE:2009 IDAHO TELEPHONE SERVICE ASSISTANCE PROGRAM
ANNUAL REPORT; CASE NO. GNR-I0-
BACKGROUND
Each year the Administrator of the Idaho Telecommunications Service Assistance
Program (ITSAP) files a report detailing the activities and status ofthe program during the
previous year. The Administrator also determines the funding requirement for the following year
and submits a recommended budget with the annual report.
The Idaho Telephone Service Assistance Program (ITSAP) was established by the Idaho
Legislature in 1987 to provide income-eligible recipients with a reduction in costs of residential
basic local exchange telephone service. The Idaho Department of Health and Welfare
administers the program in conjunction with federal programs to maximize federal "lifeline" and
link up" contributions to Idaho s low-income customers. Idaho Code ~ 56-901(1). Funds for
the program are raised through a uniform statewide monthly surcharge on end-user business
residential, and wireless access service lines as determined by the Idaho Public Utilities
Commission. Idaho Code ~ 56-904(1). Idaho telephone companies provide assistance in the
form of a monthly discount of $3.50 to eligible subscribers. 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 ITSAP surcharge has been maintained at $.06 per access line per month for the
past three years. See Commission Order No. 30775.
DECISION MEMORANDUM APRIL 2, 2010
THE 2009 ANNUAL REPORT
On February 26, 2010, the Idaho Telephone Service Assistance Program Administrator
Alyson Anderson, filed the ITSAP annual report for the fiscal year ending December 31 2009.
Ms. Anderson reported that 2009 saw a drop in local access lines (6%), an increase in wireless
lines (8%), and a slight decrease in the number ofiTSAP recipients (1 %). Ms. Anderson
reported gross revenues from surcharges of$I 207 317, of which $437 933 (36%) was assessed
on wireline services and $763 384 (64%) was assessed on wireless services. Accrued interest
from a Merrill-Lynch CMA-Government Securities Fund added $78 to the revenue, for a total
fund revenue amount of$I 201 395.
The average number of wireline access lines per month reported to the Administrator for
2009 decreased by 6% to approximately 579 150. The average number of wireless access lines
per month increased by 8% to approximately 1 064 650. In the aggregate, the average number of
wireline and wireless lines per month increased by approximately 41 235, for an average
monthly total of approximately 1 643 800.
The 2009 average number of reported ITSAP recipients per month (27 690)1 decreased
slightly by 1 % from 2008 (28 006). Telecommunications companies received $1 175 5292 in
disbursements for ITSAP credits paid to eligible recipients during the year compared to
172 978 in 2008. Disbursements for telephone company administrative costs were $126 330
nearly the same as the 2008 amount ($129 341).
The ITSAP Administrator s fees and expenses were $18 531 for the year. These
expenses include bank charges and audit fees. The fund's cash balance at the end ofthe year
was reported at $221 922. Due to the negligible interest rates, the Administrator made no
investments in U.S. Treasury bonds as she has in past years. Instead, in the 2009 report, the
Administrator recommended and the Commission concurred that funds would not be reinvested.
Instead the Commission determined that the fund balance should be drawn down and maintained
at a level necessary to keep the fund viable.
I The number of recipients reported by the telephone companies peaked in May 2009 at 28 698.
2 Some companies submit reports and remittances on a monthly basis while others submit on a quarterly, semi-
annual or annual basis. This creates a lag time for the Administrator from the time the telephone company funds are
deposited to when disbursements are made to the companies. For this reason, the disbursements for eligible
recipient credits are slightly higher in 2009 even though the number of recipients decreased during the same period.
The disbursement amounts reported by the Administrator are for actual payments made during the calendar year.
DECISION MEMORANDUM APRIL 2, 2010
2010 BUDGET AND TRENDS
In Ms. Anderson s 2010 budget, she projects the funding requirement to be
approximately $1 163 200. The number of local access lines is expected to decrease by an
estimated 3.5% and the number of wireless lines is expected to increase by 2.5%. As anticipated
the average number of recipients per month in 2009 decreased slightly, but is expected to remain
relatively unchanged or decrease only slightly in 2010. Based on the December 2009 data
Ms. Anderson estimates the average number of recipients in 2010 to be approximately 26 252
per month.
The ITSAP recipient reimbursement for 2010 is projected to be approximately
102 600 and the ITSAP expenses are estimated to be $105 554 for costs associated with
administration of the ITSAP program. Telephone company administrative costs are estimated to
be $95 600 , and the ITSAP Administrator costs are expected to be $10 000. The surcharge
revenue received from local access and wireless telephone companies, at the current rate of
$0., is projected to be $1 163 200. With the 2009 end-of-year cash balance of $221 ,922 and
an interest accrual of approximately $80, the 2009 year-end cash balance is estimated to be
$1 77 100.
ADMINISTRATOR'S 2010 FUNDING RECOMMENDATIONS
Based upon the estimated 2010 budget, Ms. Anderson believes adequate ITSAP funding
will be supported at the current surcharge rate of $.06 per line. She, therefore, recommends the
current rate to be maintained during 2010. The surcharge rate of $0.06 combined with the 2009
year-end cash balance will result in a 2010 year-end fund balance of approximately $177 100.
This amount is sufficient to provide a 2-month cushion.
STAFF RECOMMENDATION
Staff has reviewed both the ITSAP annual report and the proposed 2010 budget. Staff
believes the 2010 budget is reasonable and agrees with the Administrator s recommendation to
maintain the current ITSAP surcharge rate at $0.06 per access line. Staff, therefore, recommends
that the Commission approve both the Administrator s rate proposal and the 2010 budget.
DECISION MEMORANDUM APRIL 2, 2010
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. 307757
2. Does the Commission wish to accept the annual report and adopt the Administrator
budget for 20107
(L L9 If.-('~
Grace Seaman
i:udememos/2009 Annual Report (TSAP,doc
DECISION MEMORANDUM APRIL 2, 2010