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Home My WebLink AboutANNREPT.docxDECISION MEMORANDUM TO:COMMISSIONER NELSON COMMISSIONER SMITH COMMISSIONER HANSEN MYRNA WALTERS STEPHANIE MILLER DAVID SCHUNKE DON HOWELL WELDON STUTZMAN EILEEN BENNER BILL EASTLAKE JIM LONG JOE CUSICK BEVERLY BARKER GARY RICHARDSON TONYA CLARK WORKING FILE FROM:BIRDELLE BROWN DATE:AUGUST 20, 1996 RE:IDAHO UNIVERSAL SERVICE FUND - 1996 ANNUAL REPORT - CASE NO. U-1500-174. On July 15, 1996, Alyson Anderson, Administrator of the Idaho Universal Service Fund (USF), filed her annual report for the July 1, 1995 to June 30, 1996 year. Staff has reviewed this report and finds it to be accurate and comprehensive. Staff commends Ms. Anderson for her continued outstanding performance as Administrator of this fund. Of the $1,113,164.59 in surcharge revenues collected through the year, $464,636.62 or 42%, was received from local exchange service surcharges, and $648,527.97 or 58% was received from MTS and WATS surcharges. The number of residential lines increased 3% over the year, business lines increased 8%, and toll minutes increased nearly 5.5%. The average rate for MTS/WATS minutes was $0.22. Disbursements were made to the seven beneficiary companies in the amount of $1,677,191.68. These disbursements reflect the authorized increase in benefits to offset the companies’ reductions of access charges to meet the statewide average and a decrease in Cambridge Telephone Company’s benefits to reflect the increased revenue resulting from an increase in local rates that will occur over a three-year period. The fund’s ending balance of $454,326 reflects a drawdown of funds of $543,677 in keeping with the Commission’s goal of reducing the fund balance to a more reasonable working level. More detail is shown in the table on the following page: BEGINNING BALANCE - July 1, 1995$58,679 RECEIPTS Local Surcharge 464,637 Toll Surcharge648,5281,113,165 US Treasure Note Redeemed 920,000 Interest 53,575 TOTAL RECEIPTS2,086,739 DISBURSEMENTS Bank/Brokerage Charges 150 Company Disbursements1,677,192 Administrative Expenses 13,751 TOTAL DISBURSEMENTS1,694,092 ENDING BALANCE$454,326 ================ There are 23 Title 61 companies providing local service in Idaho and four of these also provide toll. At the time of the report, there were 263 Title 62 companies with price lists on file with the Commission, 47 of which are participating in the fund and 129 that have been granted exemptions as non-facilities-based carriers. 21exemptions were pending, 18 companies carried no Idaho traffic during the year and 52 companies were new. Ms. Anderson reports 17 companies were in noncompliance at that time. Ms. Anderson’s efforts to keep Title 62 companies informed and in compliance are ongoing. Additionally, Staff contacted those companies that were not in compliance. Some companies have still not filed annual reports: ICON is not in compliance for the second year in a row and TTI Telecommunications is not in compliance. Citizens Utilities filed reports after Ms. Anderson’s report was filed. Noncomplying companies will be contacted by the Commission’s legal staff, and a detailed report to the Commission will follow. STATEWIDE WEIGHTED AVERAGES Statewide average local rates are $11.90 for one-party single-line residential service and $28.85 for business lines. 125% of statewide average rates are $14.87 for residential and $36.06 for business service. The statewide weighted average revenue for access was $.064 per minute. These rates do not vary significantly from those reported last year. The local rates and access rates of all recipients of the USF fall within the allowable variance of 3% and $6,000 as provided in IDAPA 31.46.01 except those of Cambridge Telephone Company. Last year the Commission ordered an increase to Cambridge’s local access to be implemented in three steps, with the second step to become effective this year. According to Order No. 26263, Cambridge will adjust its local residential rates effective October 1, 1996 as follows: 11/1/9510/1/96 Indian Valley$ 13.45$ 14.40 Cambridge 13.45 14.40 Cuprum 11.30 12.10 Lowman 12.35 13.20 The corresponding adjustment to Cambridge’s receipts from the USF has already been made. Additionally, on June 14, 1996, the Commission approved a reduction in distribution of the USF to Rural Telephone Company to correct overpayments resulting from an erroneous report filed by Rural last year. This adjustment included a reduction in Rural’s June disbursement of $16,558.08 (which is $2,057 per month for the eight months since October 1995, and a $102.08 shortage owed the USF) and a continued monthly reduction of $2,057. These adjustments occurred after the June 30 close of this year’s books and will not appear in the report until next year. No further adjustments in local rates, access rates or USF disbursements are required at this time for the seven participating companies based on current circumstances as reported. FUNDING OPTIONS The Administrator’s report presents two options for continued funding of the USF: one is to maintain the current level of surcharges, thus reducing the fund by $391,837, bringing the balance down to approximately $62,000. The second option, which is preferred by both Ms. Anderson and the Staff, is to increase surcharge rates to a level that will cause the fund to be self-sustaining. The current working balance would remain and would be increased about $7,000. Copies of the Administrator’s options are attached. It should be noted that, as a part of its sale of exchanges, U S WEST will contribute money to the fund when its sales are completed. Order No. 26242 requires U S WEST to contribute $28,715 to the Universal Service Fund upon completion of the sale of NuAcres to Farmers Mutual, and Order No. 26353 requires a contribution of $324,987 following the sale of the rest of the exchanges. The $324,987 should be prorated and paid to the fund upon completion of each sale rather than in a lump sum after the final sale is completed. Because there is no certainty regarding the timing of these receipts, and because there is considerable uncertainty about the future of the USF, Staff does not recommend that we rely on this money for the 1996-97 year. If it should be received before the end of the year, we recommend that the Administrator invest the money until it is allocated in the future. The USF year is nearly half over before increased surcharges reach the fund. (The year begins July 1; rate changes are effective October 1 and payments reflecting the new rates generally are remitted starting in November or December.) This means that the projected revenue will be earned between November 1996 and October 1997 rather than from July to June. This delay could cause the reduced balances projected by Option 1, which maintains the current level of surcharges, to become dangerously low during the year. Further, neither Staff nor the Administrator favors drawing the fund to a low level in view of the uncertainties of the future of USF. Staff recommends keeping the fund balance at its current level by increasing the surcharges as proposed in the Administrator’s Option 2. DECISION Which funding option does the Commissioners wish to adopt for the coming year? Status Quo? Maintain Funding? Something else? Birdelle Brown issues\usf\annrept.dmo