19980127Order No 27314.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF FILER MUTUAL TELEPHONE COMPANY FOR DISBURSEMENTS FROM THE IDAHO UNIVERSAL SERVICE FUND.
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CASE NO. FILT971

ORDER NO. 27314

On December 31, 1997, Filer Mutual Telephone Company (Filer Mutual; Company) timely filed a Petition for Reconsideration of the Commissions final Order No. 27249 issued in this case on December 12, 1997. By this Order, we grant in part and deny in part Filer Mutuals Petition.
First, Filer Mutual argues that the Commissions decision to allow the Company an overall return of 10% but limited to 60% of Filer Mutuals current rate base is arbitrary and capricious on its face. Filer Mutual argues that the net effect of the Commissions decision is exactly the same as if it had arbitrarily disallowed 40% of the Companys rate base. Filer Mutual contends that if the Commission believes that Filer Mutuals requested rate of return is unreasonable, then the Commission is free to adjust that rate to a reasonable level that can be supported by the evidentiary record. The Commission cannot, Filer Mutual asserts, simply disallow 40% of the rate base or rate of return on the arbitrary grounds that this amount was allocated to capital credits in 1995 and 1996. Filer Mutual argues that these capital credits have no relationship to the need for a rate of return and vary from year to year based on the Companys needs at the time. Consequently, Filer Mutual concludes, they do not constitute a principled or evidentiary basis for the Commissions disallowance. The Company seeks reconsideration of this issue by brief or oral argument; it does not seek an evidentiary rehearing.

Filer Mutuals second point of contention involves the Companys estimation of its net loss in intrastate access charge revenue attributable to the implementation of EAS. The Commission accepted Filer Mutuals estimate of $312,923 per year. Filer Mutual notes, however, that it implemented EAS in September 1997, so it now has three months of actual lost access charge data rather than the estimates and projections which it presented at the hearing. Based on the three months of actual data, it is apparent, according to Filer Mutual, that the estimated lost access charge contained in the Commissions Order is too low by approximately $100,000 a year. Filer Mutual states that it does not at this juncture, fully understand why the access charge estimates contained an error of this magnitude but it seeks reconsideration for the purpose of determining the cause of the error and quantifying its magnitude and impact on the Commissions revenue requirement calculation. Filer does seek an evidentiary rehearing on this issue. If the rehearing is granted, Filer Mutual will present the testimony and evidence on this issue of Mr. Ray Hendershot.
The only party to file a responsive pleading to Filer Mutuals petition within the 7-day time period prescribed by the Commissions Rules of Procedure was the Commission Staff. Staff filed an answer in which it contends that the Commissions final order is not in error and that the Petition for Reconsideration should be denied. First, Staff notes that 100% of Filer Mutuals plant investment (i.e., its rate base) was obtained from customer contributions through additional rates (i.e., its rates exceed its current operating costs) thereby justifying that none of the plant invested to date should earn a return since it is essentially a customer contribution. The Commission concluded that a maximum of 60% of Filer Mutuals rate base should earn a return because the Company only retained 60% of the earnings and the remainder was returned to the customers thereby reducing Filer Mutuals rates. Staff argues that the Commissions ruling is reasonable because it reflects the fact that the Company would need cash flow to cover future investments. The Commissions ruling also provides that all new investment will earn a 100% return in the Companys next rate proceeding which, Staff asserts, is fair and reasonable.

Staff objects to Filer Mutuals request that the Commission conduct another evidentiary hearing to recalculate the Companys actual lost access charge revenues. First, the $312,923 estimate was provided by Filer Mutual; not the Commission, as Filer Mutuals petition suggests. The Commission simply accepted this estimate. Second, as Filer Mutual notes, the Company recently implemented EAS. Consequently, there are only three months of actual data pertaining to lost access charge revenues. Moreover, Staff notes that the latter portion of the three months of actual data falls near or in the holiday season when call volumes are typically much higher. Staff asserts that it would not be reasonable to annualize these higher than average call volumes. Similarly, Staff argues that call volumes are typically higher immediately after EAS is implemented within a region but that this trend usually tapers off. Again, Staff believes that the call volumes reflected in the lost revenues apparently incurred by Filer Mutual are not typical and the Commission should wait until more actual data is available representing a longer period of time before recalculating Filer Mutuals lost access charge revenues.
FINDINGS
We hereby grant Filer Mutuals Petition for Reconsideration on its first point of contention; that is, whether the Commission erred in limiting Filer Mutuals return to 60% of the Companys current rate base in calculating the Companys USF entitlement. This is a case of first impression and one of considerable importance. Because of that and the complexity of this particular issue, we believe that it would be advisable to allow Filer Mutual the greatest opportunity possible to brief this Commission on the matter.
Regarding Filer Mutuals request that the record be reopened so that the Company can provide actual data pertaining to its lost access charge revenues, we deny Filer Mutuals Petition for Reconsideration. Contrary to Filer Mutuals Petition, this Commission did not create the $312,923 per year estimate of lost access charge revenues. This estimate was provided by Filer Mutual, was unchallenged and was relied upon by the Commission.
Second, we agree with Staff that there is insufficient actual data to justify reevaluating Filer Mutuals lost access charge revenues. This is exacerbated by the fact that the actual data that is available is based on the time period immediately following the implementation of EAS and near or during the holiday season. Both of these factors are likely to result in an increased call volume. It would be unreasonable, therefore, to annualize the three months of actual data available. We will not consider reevaluating this issue until there is at least 12 months of actual data available.
O R D E R
IT IS HEREBY ORDERED that the Petition for Reconsideration of Filer Mutual is granted in part and denied in part as set forth above.
THIS IS AN INTERLOCUTORY ORDER. Any person interested in this Order may file a petition for review within twenty-one (21) days of the service date of this Order with regard to any matter decided in this Order. A petition to review may request that the Commission: (1) rescind, clarify, alter, amend; (2) stay; or (3) finalize this Interlocutory Order. After any person has petitioned for review, any other person may file a cross-petition within seven (7) days. See  Rules 321, 322, 323.03, 324, 325 (IDAPA 31.01.01.321 -325.)

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this day of January 1998.

DENNIS S. HANSEN, PRESIDENT

RALPH NELSON, COMMISSIONER

MARSHA H. SMITH, COMMISSIONER

ATTEST:

Myrna J. Walters
Commission Secretary

vld/O:FIL-T-97-1.bp3

ORDER NO. 27314 -1-

Office of the Secretary
Service Date
January 27, 1998