20030320Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONERKJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
WORKING FILE
FROM:BIRDELLE BROWN
DATE:MARCH 20,2003
RE:2002 ANNUAL REPORT AND RECOMMENDATIONS FOR THE IDAHO
TELEPHONE SERVICE ASSISTANCE PROGRAM
The Idaho Telephone Service Assistance Program (ITSAP)Administrator,Alyson
Anderson,filed the ITSAP Annual Report for the fiscal year ending December 31,2002.Ms.
Anderson reported gross revenues from surcharges of $1,243,775 of which $743,229 (60%)was
assessed on local exchange services and $500,568 (40%)was assessed on wireless/cellular
service.Disbursements included credits to eligible subscribers of $1,159,039 and phone
company administration costs of $99,275.The Administrator's fees were $8,134 for the year.
The fund's cash balance at the end of the year was $18,371.
The average number of residential local access lines for the year remained nearly
constant at 504,459 while average business local access lines increased about 3%to 200,910.
Average wireless access lines increased about 24%to 488,629.The average total number of
lines increased overall about 93,000 lines or 8%to 1,193,997.
The average number of credit recipients increased nearly 3,000 (12%)to 27,557 and
received $1,159,039 in assistance,an increase of $120,925 (12%)from last year.Administrative
costs reported by the telephone companies also increased 12%to $99,275 for the year.
The current surcharge of $0.10 per line was established effective July 1,2002,and was an
increase from $0.08 per line established in February 2002.Ms.Anderson reports "the ITSAP
continues to struggle with cash flow and the ability to reimburse companies for the credits
provided."She reported the cash balance at February 28,2003 as being only $87.
DECISION MEMORANDUM -1 -MARCH 20,2003
Ms.Anderson provided four funding options for the Commission to consider for the
coming year.Copies are attached.Three of them assumed that the 12%growth in recipients of
the fund would continue,as would the increase in telephone company administrative expenses.
She also included $5,000 for the audit that is required.She then considered surcharge rates of
$0.10 per line (resulting in a projected year-end balance of $20,712),$0.11 per line (resulting in
a projected balance of $163,864)and $0.12 per line (resulting in a projected balance of
$307,016).Ms.Anderson recommended the increase to $0.12 per local and wireless access line
saying "it is necessary for the ITSAP to carry a larger cash balance due to the difficulty in
predicting surcharge revenue and disbursements from the fund."
STAFF RECOMMENDATION
Staff agrees with Ms.Anderson that an increase is warranted.The Administrator and
Staff have attempted to conservatively predict revenue and expenses,but we have seldom been
able to adequatelypredict the growth of recipients.While wireless lines have also increased,the
associated revenue increase is not enough to fund the increased expenses for assistance and
associated administrative expenses.Staff believes the fund needs to maintain a three to four
month working balance and recommends that Ms.Anderson's requested increase to $0.12 be
approved.
irdelle Brown '
corresp/dmemos/2003/itsap2002
DECISION MEMORANDUM -2 -MARCH 20,2003
ADMINISTRATOR'S REPORT
IDAHO TELECOMMUNICATIONS SERVICE
ASSISTANCE PROGRAM
YEAR ENDED -DECEMBER 31,2002
SURCHARGE REVENUES
The Idaho TelecommunicationsService Assistance Program (ITSAP)surcharge is assessed onallresidential,business,and wireless end users not receiving the ITSAP credit.Grosssurchargerevenuesreportedbycompaniesfortheyeartotaled$1,243,775,of which $743,229(60%)was assessed on local exchangeservices and $500,568 (40%)was assessed onwireless/cellular services.Most companies actually remit net surcharge revenue,which is grosssurchargerevenuelessanyassistancecreditsprovidedtoeligiblecustomersandthecompany's administrative costs.Net surcharge revenue actually collected from telephonecompaniesfortheyearendedDecember31,2002 totaled $460,184.
DISBURSEMENTS
ASSISTANCE CREDITS/COMPANYADMINISTRATIVE EXPENSES
Telecommunications companies reported $1,159,039 in credits provided to eligible subscribers,and $99,275 in costs of administratingthe program for the year ended December 31,2002.Netsurchargerevenuesreportedbycompaniesfortheyeartotaled($14,540).
ADMINISTRATIVE FEES AND EXPENSES
Fees and expenses paid the Administrator during the year ended December 31,2002 were$8,134.These expenses include bank charges of $390.
INVESTMENTS AND FUNDS
CASH
At December 31,2002,the Idaho TelecommunicationsService Assistance Program had a cashbalanceof$18,371.The followingis a table showing the beginning,ending,and monthlycashbalancesfortheyear.
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BEGIN BALANCE BALANCE BALANCE BALANCE ENDING BALANCE12/31/01 3/31/02 6/30/02 9/30/02 12/31/02
$128,350.87 $7,780.17 $2,020.88 $49,322.40 $18,371.13
During the year ended December 31,2002,ITSAP actually reimbursed companies for netmonthlydiscountsprovidedtoeligiblesubscribersandcostsofadministeringtheprogram in theamountof$563,934.
INTEREST
Interest earned on funds during the year ended December 31,2002 was as follows.
Interest Received During the Year Ended12/31/02
Merrill Lynch Bank &Trust,CMA-GovernmentSecuritiesFund,Account #413-04330(Current Yield -.97 %)842.06
$842.06
ADMINISTRATOR'S RECOMMENDATION
On June 12,2002,the Idaho Public Utilities Commission increased the IdahoTelecommunicationsServiceAssistanceProgram(ITSAP)surcharge rate to the current $.10peraccessline,effective July 1,2002 (Order No.29056).At the time,we forecasted that the$.10 surcharge would provide a year end balance of approximately$203,015.During 2002,thelocalaccesslinesremainedvirtuallythesame,while the wireless access lines increased 24%,and the eligible credit recipients increased 12%.The ITSAP continues to strugglewith cashflowandtheabilitytoreimbursecompaniesforthecreditsprovided.The cash balance atFebruary28,2003 is only $87.It is necessary for the ITSAP to carry a larger cash balance duetothedifficultyinpredictingsurchargerevenueanddisbursementsfromthefund.I recommendthesurchargebeincreasedto$.12 per local and wireless access line.This will,hopefully,provide an adequatebalance and compensatefor uncertain conditions.
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IDAHO TELECOMMUNICATIONS SERVICE ASSISTANCE PROGRAM
2003 FUNDING OPTIONS
OPTION 1 -STATUS QUO
RAÏË CHANGE
BANK BALANCE 2/28/03 $$7
ANNUAL INVENTORY
LOCAL ACCESS 708,695 030 $854434WIRELESSACCESS484,239 0,10 581,087
TOTAL ITSAP FUNDING FOR YEAR 1/31421
ESTIMATED INTEREST INCOME 24ðESTIMATEDITSAPCREDITS(1,159,032)ESTIMATED ADMINISTRATIVE EXPENSES (1 7,837)TOTAL ESTIMATED EXPENSES (1,266,629)
PROJECTED INCOME/(DRAWDOWN)164$92
PROJECTED BALANCE 1/31/04 $164,979
OPTION 2 -MAINTAIN SURCHARGE AT $.10
ADJUST CREDITS AND ADMINISTRATIVE COSTS
RAÏE CHANGO
BANK BALANCE 2/28/03 $$7
ANNUAL INVENTORY
LOCAL ACCESS 708,695 O $850,434WlRELESSACCESS484,239 0,10 681,087
TOTAL ITSAP FUNDING FOR YEAR 1/31$21
ESTIMATED INTEREST INCOME 240ESTlMATEDITSAPCREDITS(1,294336)ESTIMATED ADMINISTRATIVE EXPENSES (113,000)TOTAL ESTIMATED EXPENSES {1,410,896)
PROJECTED INCOME/(DRAWDOWN)20,626
PROJECTED BALANCE 1/31/04 $20,712
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IDAHO TELECOMMUNICATIONS SERVICE ASSISTANCE PROGRAM
2003 FUNDING OPTIONS
OPTION 3 -INCREASE SURCHARGE RATE TO $.11ADJUSTCREDITSANDADMINISTRATVECOSTS
FUND
RATE CHANGO
BANK BALANCE 2/28/03 $$7
ANNUAL INVENTORY
LOCAL ACCESS 708,695 0,11 $935,477WIRELESSACCESS484,239 0.11 39,195
TOTAL ITSAP FUNDING FOR YEAR i 674,073
ESTIMATED INTEREST INCOME 24ðESTIMATEDITSAPCREDITS{1298,136)ESTIMATED ADMINISTRATIVE EXPENSES (113,000)TOTAL ESTIMATED EXPENSES (1,410,896)
PROJECTED INCOME/(DRAWDOWN)163,777
PROJECTED BALANCE 1/31/04 $163,884
OPTION 4 -INCREASE SURCHARGE RATE TO $.12
ADJUST CREDITS AND ADMINISTRAT VE COSTS
RATE CHANGE
BANK BALANCE 2/28/03 $87
ANNUAL INVENTORY
LOCAL ACCESS 708,695 0,12 $1 020,$21WIRELESSACCESS484,239 0,12 97,304
TOTAL ITSAP FUNDING FOR YEAR 1 717,825
ESTIMATED INTEREST INCOME 240ESTIMATEDITSAPCREDITS(1294,43 )ESTIMATED ADMINISTRATIVE EXPENSES (113,000)TOTAL ESTIMATED EXPENSES (1,410 696)
PROJECTED INCOME/(DRAWDOWN)300,929
PROJECTED BALANCE 1/31/04 $307,016
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