Staff.doc

WELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]

Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE MOTION OF FREMONT TELECOM COMPANY FOR FUNDING FROM THE IDAHO UNIVERSAL SERVICE FUND. )
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) CASE NO. FRE-T-99-1

STAFF’S RESPONSE TO FREMONT TELECOM COMPANY’S MOTION FOR FUNDING FROM THE IDAHO UNIVERSAL SERVICE FUND; STAFF’S MOTION FOR A DECLARATORY RULING

On April 9, 1999, Fremont Telecom Company filed a Motion for funding from the Idaho Universal Service Fund. Although Fremont filed its Motion in Case No. GNR-T-97-14, a case in which extended area service (EAS) calling was approved by the Commission, the Commission assigned a new docket number for Fremont’s Motion as a separate case. Staff filed this Response to Fremont’s Motion for funding from the Idaho Universal Service Fund and, in addition, requests that the Commission issue a declaratory ruling on a point of ratemaking procedure.

STAFF RESPONSE TO FREMONT’S MOTION
Staff Responds to Fremont’s Motion as follows:
1. Staff does not take significant issue with the background information provided by Fremont in paragraphs 1-5 of its Motion. However, to the extent that Fremont implies in paragraph 3 that Staff agreed in the stipulation filed in the EAS case that Fremont would have a revenue deficiency, Staff denies that implication. Staff recognized in the stipulation that an audit would need to be performed in order to determine whether or not Fremont would have a revenue deficiency or excess revenue once the EAS rates were implemented. Staff also denies the implication in paragraph 5 of Fremont’s Motion that Staff was solely responsible for the audit not being completed as soon as anticipated. Much of the delay in completing the audit resulted from Fremont’s failure to timely provide information and respond to the initial audit report prepared by Staff.
2. Staff essentially agrees with Fremont’s representation of the audit adjustments identified in paragraphs 6 and 7 of Fremont’s Motion. The 1997 test year used in the audit does include pro forma increases in revenues and expenses that are known to occur in 1998 and 1999. For example, the EAS was implemented in November 1998 and Fremont thus incurred its expenses to implement EAS in 1998. Because those expenses were largely known at the time the audit was completed, Staff made pro forma adjustments to the 1997 test year for the EAS expenses incurred in 1998. Similarly, Fremont received or will receive federal USF funds for expenses incurred by Fremont to implement EAS. Staff asserts that those adjustments to the 1997 test year are appropriate and consistent with common sense and fundamental principals of ratemaking and equity.
3. Staff denies that its adjustments to the 1997 test year are “patently unjust, confiscatory, and contrary to law.” Because adjustments for expenditures incurred in 1998 related to EAS were made to the 1997 test year, it is patently just, fair and consistent with ratemaking law and procedure to make pro forma adjustments to the test year for NECA revenue related to the 1997 test year received in 1999 by Fremont.
4. As Fremont’s Motion demonstrates, Staff and the Company were not able to agree on the final terms of the audit. Although a 1997 test year was used in the audit, the financial information for 1998 is now available for Fremont Telecom. As with any company that claims a revenue deficiency, especially where the company and Staff do not agree on the existence or amount of any deficiency, the remedy is for the Company to file a rate case and request rate relief in the form of rate increases or distributions from the Idaho USF.
WHEREFORE, Staff asks that Fremont Telecom’s Motion for Funding from the Idaho Universal Service Fund be denied.

STAFF’S MOTION FOR DECLARATORY RULING
As Fremont’s Motion and Staff’s Response indicate, Fremont and the Staff fundamentally disagree on whether an adjustment should be made to the 1997 test year for known and measurable NECA revenue received by Fremont in 1999. Pursuant to Commission Rule of Procedure 101, Staff requests that the Commission issue a declaratory ruling regarding the pro forma adjustment disputed by the parties. Staff’s Motion is supported by the Affidavit of Terri Carlock filed along with this Motion.
As stated by the Affidavit of Terri Carlock, “good audit, accounting and ratemaking procedures require adjustments to the test year for the known and measurable NECA payments in 1999.” Staff requests that the Commission issue a declaratory ruling to confirm that known and measurable NECA payments to Fremont should be considered in determining Fremont’s revenue requirement.
Staff requests oral argument on its Motion.
RESPECTFULLY submitted this day of May 1999.

Weldon B. Stutzman
Deputy Attorney General

vld/N:FRE-T-99-1_ws

STAFF’S RESPONSE TO FREMONT TELECOM
COMPANY’S MOTION FOR FUNDING FROM
THE IDAHO UNIVERSAL SERVICE FUND; STAFF’S
MOTION FOR A DECLARATORY RULING 3