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Home My WebLink About20020613Decision Memo.pdfDECISION MEMORANDUM TO:COMMISSIONER KJELLANDER COMMISSIONER SMITH COMMISSIONER HANSEN JEAN JEWELL RANDY LOBB DON HOWELL JOE CUSICK WAYNE HART CAROLEE HALL DOUG COOLEY LYNN ANDERSON BEVERLY BARKER RON LAW GENE FADNESS TONYA CLARK WORKING FILE Co 8 u^ FROM:BIRDELLE BROWN DATE:JUNE 13,2002 RE:IDAHO TELEPHONE SERVICE ASSISTANCE PROGRAM (ITSAP) FUNDING NEEDS. The ITSAP Administrator,AlysonAnderson,has filed her quarterlyreport for ITSAP in which she recommends an increase in the funding surcharge from $0.08 to $0.10 to be effective July 1,2002. Ms.Anderson reports a gross revenue of $246,517 for the quarter and a net revenue of $83,237.The net revenue,which is the amount actuallyremitted to the Administrator,is the Surcharge Revenue,less Assistance Given,less Company Administrative Expenses.Companies whose collections were less than the benefits provided are issued checks by the Administrator. Assistance was provided in the amount of $28 1,317 and $24,093 was paid to companies to reimburse them for administering the program.The fund Administrator's fees and expenses for the quarter were $2,242.The cash balance in the fund at March 31,2002 was $7,780.The net revenue of the fund for the quarter was ($155,705). DECISION MEMORANDUM l JUNE 13,2002 In November 2001 the Commission approved an increase in the surcharge rate from $0.05 per customer per month to $0.08 per customer per month,to be effective February 1.This increase was recommended because the fund had used the surplus balance from previous years, and the projections were that $0.08 per customer per month would make the fund self-sufficient. Those projections assumed the existing balance at the end of September and did not project growth or decline in either recipients or collections.The projections also assumed that the rate increase would begin in January. The ITSAP fund is particularlyhard to predict because of growth factors.The objective of the ITSAP fund is to seek out and assist as many low-income households as possible in the state,so the number of recipients is expected to grow until that goal is met.It is currently growing at more than 30%per year.The number of local exchange lines,on the other hand,is declining.Wireless lines are,at the present time,growing enough to meet the demands of increased recipients,but only barely.Another factor is the ongoing problem of the time lag between implementing rates and the time the Administrator begins to see the results.This lag can easily extend to more than five months.Our procedure for estimating funding needs does not include forecasts in growth in benefits or collections,but is based on the numbers that are current at the time of the estimate.Additionally,we originally assumed a bank balance and interest-bearinginstruments that no longer exist. The result is,as explained in the Administrator's report,the funds are currently insufficient to reimburse all companies for the net ITSAP credit.The Administrator estimates an increase of $0.02 per customer per line per month is required (bringing the total surcharge to $0.10)to bring the fund to a functional level and has requested that this increase be made effective July 1,2002.With this increase,the Administrator estimates an ending balance for the year of $203,015.(See Administrators report attached.) STAFF RECOMMENDATION Staff has carefullyreviewed the Administrator's reports and agrees with her recommendations. DECISION MEMORANDUM 2 JUNE 13,2002 Staff recommends that the ITSAP surcharge be increased to $0.10 per line per month on all wireline and wireless lines except those of ITSAP recipients,effective July 1,2002.Does the Commission agree? BTdelle Brown A corresp/dmemos/2002/itsapfund.ql DECISION MEMORANDUM 3 JUNE 13,2002 ADMINISTRATOR'S REPORT IDAHO TELECOMMUNICATIONS SERVICE ASSISTANCE PROGRAM QUARTER ENDED -MARCH 31,2002 SURCHARGE REVENUES The Idaho Telecommunications Service Assistance Program (ITSAP)surcharge is assessed on all residential,business,and wireless customers not receiving the ITSAP credit.Gross surcharge revenues reported by companies for the quarter ended March 31,2002 totaled $246,517 of which $147,026 (60%)was assessed on local exchangeservices and $99,491 (40%)was assessed onwireless/cellular services.Most companies actually remit net surcharge revenue, which is the gross surcharge revenue less any assistance credits provided to eligible customers and the company's administrative costs.Net surcharge revenue actually collected from telephonecompanies for the quarter ended March 31,2002 totaled $83,237. DISBURSEMENTS ASSISTANCE CREDITS/COMPANY ADMINISTRATIVE EXPENSES Telephonecompanies reported $281,317 in credits provided to eligible subscribers,and $24,093 in costs of administratingthe program for the quarterendedMarch31,2002.Net surcharge revenues reported by companies for thequartertotaled($58,892). ADMINISTRATIVE FEES AND EXPENSES Administrative fees and expenses paid during the quarter ended March 31,2002 were $2,242. INVESTMENTS AND FUNDS CASH At March 31,2002,the Idaho Telecommunications Service Assistance Programhadacashbalanceof$7,780.The followingis a table showingthe beginning,ending,and monthlycash balances for the quarter. BEGINNING ENDINGBALANCE12/31/01 BALANCE 1/31/02 BALANCE 2/28/02 BALANCE 3/31/02 $128,350.87 $4,224.59 $(2,082.77)$7,780.17 The ITSAP operateson a cash basis.As noted earlier,the net surcharge revenue actuallycollected from telephonecompanies for the quarter ended March 31,2002 totaled $83,237,and ITSAP reimbursed companies for netmonthlydiscountsprovidedandadministrativecostsintheamountof$201,834.This significantly reduced the cash balance during the quarter. INTEREST Interest earned on funds during the quarter ended March 31,2002 was asfollows. Merrill Lynch Bank &Trust,CMA-Government Securities Fund,Account #413-04330 (Current Yield -1.52%)$268.01 Interest Received During Quarter Ended 3/31/02 $268.01 ADMINISTRATOR'S RECOMMENDATION The Idaho Telecommunications Service Assistance Program (ITSAP)has verylittleincashandinvestments.In fact,the funds are currently insufficient toreimburseallcompaniesforthenetITSAPcreditprovidedtoeligiblesubscribers. The Idaho Public Utilities Commission recently increased the ITSAP surchargeratetothecurrent$.08 per access line effective February 1,2002 (Order No. 28914);however this is proving to be inadequate.ITSAP funding needs aredifficulttopredict,though I believe in this case the main issue is timing.The $.08 surcharge rate was originally based on information as of October 2001. The effective date of the new surcharge rate was February 1,2002,and ITSAP had used all the cash and investments by that time.Therefore,it is necessary toincreasethesurchargerateagain.If the surcharge rate was increased to $.09 per access line,the ITSAP would have an approximatebalance of $58,682 at March 31,2003.While this is a positivebalance,given the uncertain nature of ITSAP \do not believe it is an adequatebalance.I recommend increasing the surcharge rate to $.10 per access line to be effective July 1,2002.This should result in an approximatebalance of $203,015 at March 31,2003. OPTION 1 -STATUS QUO FUND RATE CHANGE BANK BALANCE 3/31/02 $7,780 ESTIMATED INTEREST INCOME 1,000 ANNUAL INVENTORY RESIDENTIAL LINES 501,297 0.08 $481,245 BUSINESS LINES 190,586 0.08 182,963 WIRELESS LINES 510,890 0.08 490,454 TOTAL ITSAP FUNDING FOR YEAR 1,154,662 ESTIMATED ITSAP CREDITS 1,136,898 ESTIMATEDADMINISTRATIVE EXPENSES 112,194 TOTAL ESTIMATED EXPENSES 1,249,092 PROJECTED INCOME/(DRAWDOWN)(94,431) PROJECTED BALANCE 3/31/03 ($85,650) OPTION 2 -INCREASE SURCHARGE RATE TO $.09 FUND RATE CHANGE BANK BALANCE 3/31/02 $7,780 ESTIMATED INTEREST INCOME 1,000 ANNUAL INVENTORY RESIDENTIAL LINES 501,297 0.09 $541,401 BUSINESS LINES 190,586 0.09 205,833 WIRELESS LINES 510,890 0.09 551,761 TOTAL ITSAP FUNDING FOR YEAR 1,298,994 ESTIMATED ITSAP CREDITS 1,136,898 ESTIMATED ADMINISTRATIVE EXPENSES 112,194 TOTAL ESTIMATED EXPENSES 1,249,092 PROJECTED INCOME/(DRAWDOWN)49,902 PROJECTED BALANCE 3/31/03 $58,682 OPTION 3 -INCREASE SURCHARGE RATE TO $.10 FUND RATE CHANGE BANK BALANCE 3/31/02 $7,780 ESTIMATED INTEREST INCOME 1,000 ANNUAL INVENTORY RESIDENTIAL LINES 501,297 0.10 $601,556 BUSINESS LINES 190,586 0.10 228,703 WIRELESS LINES 510,890 0.10 613,068 TOTAL ITSAP FUNDING FOR YEAR 1,443,327 ESTIMATED ITSAP CREDITS 1,136,898 ESTIMATED ADMINISTRATIVE EXPENSES 112,194 TOTAL ESTIMATED EXPENSES 1,249,092 PROJECTED INCOME/(DRAWDOWN)194,235 PROJECTED BALANCE 3/31/03 $203,015