HomeMy WebLinkAbout28124.doc BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF ANNUAL REVISION OF UNIVERSAL SERVICE FUND SURCHARGES TO BECOME EFFECTIVE OCTOBER 1, 1999. )
)
)
)
)
CASE NO. GNR-T-99-15
ORDER NO. 28124
On July 15, 1999, as required by Commission rules, the Idaho Universal Service Fund Administrator filed the Universal Service Fund Annual Report for the period July 1, 1998 through June 30, 1999.
Based upon the Commission’s review of the information presented by the Administrator and the Staff calculations, the Commission finds that the current Idaho Universal Service Fund (USF) surcharge of $0.12 per residential line and $0.24 per business line does not need to be changed. The Commission orders the present Idaho USF surcharge of $0.0022 per MTS/WATS minute should be increased to $0.0035 per MTS/WATS minute to ensure the continued solvency of the USF. This increase goes into effect October 1, 1999.
The Commission orders Albion Telephone Company, Cambridge Telephone Company, Fremont Telcom Company, Inland Telephone Company, Direct Communications (formerly Rockland Telephone Company and Direct Communications Lakeside, Inc.) and Rural Telephone Company to reduce their respective access rates to the weighted statewide average of $0.053382 per minute effective October 1, 1999.
The Commission finds that the current residential and business line rates for Cambridge Telephone Company, Midvale Telephone Company and Inland Telephone Company do not meet the statutory threshold of 125% of the statewide averages required for continued Idaho USF support. See Idaho Code § 62-610. The Commission, therefore, orders Cambridge, Inland and Midvale to file plans with the Commission within twenty-eight (28) days of this Order indicating whether they intend to withdraw from participation in the Idaho USF or how they will bring rates into compliance with the statutory requirements. Until the Commission receives those plans, it will stay enforcement of its Order ordering a reduction in access rates for Cambridge and Inland to determine whether they intend to continue participating in the Idaho USF.
BACKGROUND
The Idaho Telecommunications Act of 1988 established an Idaho Universal Service Fund “for the purpose of maintaining the universal availability of local exchange service at reasonable rates and to promote the availability of message telecommunication service (MTS) at reasonably comparable prices throughout the state of Idaho.” Idaho Code 62-610(1). The Idaho Act requires USF surcharges be levied on local exchange service, intrastate MTS (long distance) and wide area telecommunication services (WATS). These surcharges are remitted to the Idaho USF. Idaho USF funds are then distributed to qualifying high-cost local exchange telephone companies. Fund distributions to eligible companies reduce those companies’ revenue requirements that ordinarily would be satisfied solely from rates and charges to the companies’ customers; i.e., USF distributions offset a portion of the revenues that necessarily would be paid by customers in the absence of the USF. See Idaho Code § 62 610(2)-(4).
In July of each year the Administrator of the fund issues an annual report to the Commission reviewing the fund’s balance and recommending increased, decreased or unchanged funding levels. Following its review of the report, the Commission issues an Order prescribing USF surcharges for the next 12 months beginning October 1. See Rules 104-106 of the Commission’s USF Rules, IDAPA 31.46.01.104-106.
CHANGES TO TOLL ACCESS RATES, RESIDENTIAL RATES
AND BUSINESS RATES
Idaho Code § 62-610(3) establishes the eligibility requirements for local exchange companies to draw funds from the USF. It requires participating companies’ local business and residential rates to be at least 125% of the statewide average and their toll access rates to be at least 100% of the statewide average. The Commission’s rules require a participating company to revise its rates if the difference in the company’s rates and the statewide threshold rate is more than three percent (3%) and the difference in the amount of revenue collected under the company’s rates and the threshold rate is greater than $6,000. See IDAPA 31.46.01.106.02.
1. Toll Access Rates. Based on the weighted average access revenue, the USF Administrator reported a statewide weighted average rate for toll access of $0.053382 per minute. This is a decrease from the 1997 average rate of $0.06085 per minute and is largely the result of rebalancing of GTE, Citizens and U S WEST North rates. Toll access minutes reported by the local exchange companies decreased from 848 million minutes in the1998 report to 729 million minutes in the1999 report, reflecting a fourteen percent (14%) decrease in minutes. The toll access minutes decrease was largely attributed to recent Commission decisions granting customers EAS.
For six current Idaho USF recipient local exchange companies Albion, Direct Communications, Fremont, Cambridge, Inland and Rural toll access rates are more than 3% above the statewide average and exceed the statutory threshold by more than $6,000. A reduction of these rates to the eligibility threshold level will reduce total revenues for Albion by $13,115, Cambridge by $14,238, Fremont by $ 57,917, Inland by $7,445 and Rural by $14,196 and increase their residual revenue requirements. Consequently, their funding requirements from the Idaho USF would be increased by the same amounts.
By Order No. 27866 dated January 14, 1999, in Case No. ROK-T-98-1, the Commission approved the merger of Direct Communications Rockland, Inc. with its subsidiary, Direct Communications Lakeside, Inc. Direct Communications Rockland was a 1998 Idaho USF recipient and must also decrease its access rates to the statewide average. Direct Communications Lakeside was not an Idaho USF recipient. However, its access rates also exceed the statewide average. The merged company, Direct Communications, must reduce its access rates to the statewide average and reduce total revenues for it by $18,490.
The Commission finds that Albion, Direct Communications, Fremont, Cambridge, Inland and Rural need to reduce respective toll access rate to meet the requirements of Idaho Code § 62-610 and IDAPA 31.46.01.106.02.
2. Residential and Business Rates. Section 62-610 and Rule 106.02 also require adjustments to the single-line residential and business rates of several of the companies that receive USF funds so that those rates are 125% or more of the statewide average and those companies retain USF eligibility. The statewide average is $17.02 for residential services and $31.82 for business service. See Administrator’s Report – Idaho Universal Service Fund – Year Ended – June 30, 1999. To remain eligible for Idaho USF, all USF recipient companies must adjust their rates to at least $21.28 for residential lines and $39.77 for business rates to retain eligibility. Residential and business rates for Idaho USF recipients may exceed the 125% threshold. Idaho Code § 62-610.
The Commission finds that several of the USF recipient companies recently have been authorized to expand local calling areas to give toll free calling to their customers -- extended area service (EAS). In each of those cases, the Commission approved residential rates of $24.10 and business rates of $42.00. The Commission finds those rates do not need to be decreased and should remain at $24.10 for residential service and $42.00 for business service.
The Commission also notes that it recently approved EAS for three exchanges served by Rural (Tipanuk, Boise River and Prairie) and that it ordered Rural to increase rates for customers in those exchanges to $24.10 for residential service and $42.00 for business service when EAS is actually implemented. Order No. 28114. Testimony in those cases (GNR-T-97-9, GNR-T-98-18) indicated that the cut-over for EAS for those customers may not occur for over a year because new facilities need to be constructed to accommodate anticipated growth, existing capacity problems and EAS. Nothing in this Order changes those decisions. Therefore, when EAS is implemented for customers in the three Rural exchanges, Rural should increase those rates to $24.10 for residential service and $42.00 for business service as required by Order No. 28114. Pursuant to this USF Order, at the same time it increases rates for Tipanuk, Prairie and Boise River, Rural is ordered to increase all its rates in its other exchanges to 125% of the statewide average in order to retain its USF eligibility. Rural can apply to the Commission for increased USF funding when it completes the facilities upgrades necessary to meet the increased capacity demands it identified in GNR-T-97-9 and GNR-T-98-18 for growth and EAS.
The Commission finds that Cambridge’s, Midvale’s and Inland’s respective residential and business rates, however, do not meet the requirements of Idaho Code § 62-610 and IDAPA 31.46.01.106.02 that would qualify them to continue Idaho USF support. The Commission finds that it does not have enough information in the record regarding these companies’ rates and revenue requirements. The Commission has been informed that both Cambridge and Midvale will be filing rate cases, proposing mergers and responding to existing EAS requests in the near future. Letter from Conley Ward dated August 24, 1999. The Commission, therefore, orders Cambridge, Inland and Midvale to file plans with the Commission within twenty-eight (28) days of this Order indicating whether they intend to withdraw from participation in the Idaho USF or how they will bring rates into compliance with the statutory requirements.
1999-2000 DISBURSEMENTS
Funding requirements for the year beginning October 1, 1999, after the access rate and residential and business rate adjustments discussed above, will be:
1998-99 1999-2000
Annual 1999 Annual
Disbursements Adjustments Disbursements
Albion Telephone $501,123 $ 13,115 $514,238
Cambridge Telephone 413,380 413,380
Inland Telephone 55,161 55,161
Fremont Telecom 110,081 110,081
Midvale Telephone 195,020 195,020
Direct Communications
(formerly Rockland) 203,357 18,490 221,847
Rural Telephone 233,658 14,196 247,854
Silver Star Telecom 163,101 163,101
$1,764,800 $155,882 $1,920,682
The Commission notes that the annual disbursements for Cambridge, Inland and Midvale have not been changed. If these companies indicate they intend to continue to participate in the Idaho USF and indicate how they will meet the eligibility requirements for participation, the Commission will set their annual disbursements at that time. Until the companies file their respective plans, the annual Idaho USF disbursements to Cambridge, Inland and Midvale will remain at the 1998-1999 levels.
INCREASE IN USF SURCHARGES
The USF is funded by surcharges on residential and business lines and toll surcharges on MTS and WATS services. The current per-line per-month surcharges of $0.12 for residential customers and $0.24 for business customers and $0.0018 per MTS/WATS minute were established in February 1998. Order No. 27380.
The USF Administrator reported that surcharge revenues collected during the year totaled $1,922,513 of which $1,264,575, or 66%, was assessed on local exchange services and $657,937, or 34%, was assessed on MTS/WATS services. Total authorized disbursements to local exchange companies during the year ended June 30, 1999 were $1,764,802. Administrative fees and expenses for the year ended June 30, 1999 were $21,439. As of June 30, 1999, the Idaho Universal Service Fund had a cash balance of $139,186. Total residential and business lines at May 1, 1999 were reported to be 514,314 and 182,972, respectively. This represents a seven percent (7%) increase in residential lines and two percent (2%) decrease in business lines from the prior year. Total MTS/WATS billed minutes of use for the year ended December 31, 1998, were 329,409,067, a 22% decrease over the prior year.
The USF Administrator advised the Commission that an increase to the MTS/WATS surcharge is necessary because the Idaho USF needs to maintain a prudent reserve in order to maintain stability for disbursements and address fluctuations in the monthly surcharge revenue. The Administrator stated that the present USF cash balance of $139,186 is inadequate to maintain the integrity of the fund because “there are fluctuations in the monthly surcharge revenue remitted to the IUSF.” Moreover, the Administrator stated that there is a two-month lag in the reporting. The Administrator suggested that an appropriate reserve balance is $500,000 -- equaling approximately three months of disbursements to eligible companies and administrative expenses. The Commission finds that an adequate reserve of $500,000 provides surcharge rate stability while meeting additional funding requirements.
The Commission finds that the target balance for the funds in upcoming years should be set at a level that can meet anticipated needs plus reasonable administrative expenses. Determining future USF funding needs is not an exact science. However, the Commission begins by projecting the future USF needs based upon the Administrator’s Annual Report and then examining other events that may affect the fund.
For instance, the Commission recently approved EAS for some Rural Telephone Company exchanges. Rural will be constructing additional facilities to address EAS, anticipated growth and capacity problems it is currently encountering. Rural will be increasing its USF draw to provide for the additional facilities. Those additional facilities could increase USF disbursements more than $200,000. The reduction in the MTS/WATS minutes assessed the surcharge and the increase in local exchange rates due to EAS, need to be considered when determining the surcharge rates.
The 1998 Annual Universal Service Report anticipated a 30,000,000-minute reduction in the MTS/WATS minutes as a result of EAS. It was expected that a 15,000,000-minute reduction would actually occur during 1998-99 and the remainder would occur during 1999-2000. Thus, the projected toll minutes were reduced by 15,000,000 minutes. This reduced the expected revenue by $33,000.00. If the current surcharge rates were continued, the fund balance will be approximately $336,911 by year end June 30, 2000. However, this would not meet the proposed three-month reserve. While the year end balance would be adequate if no new disbursements are authorized, as explained above, new disbursements are anticipated. Therefore, the surcharge rates need to be adjusted.
The USF Administrator recommended that the MTS/WATS surcharge rate be increased to $0.003 per minute to provide a more reasonable reserve. The Administrator stated that at this rate MTS/WATS services would contribute 43% of the total surcharge revenue and local exchange services would contribute 57% of the total surcharge revenue. The fund balance at year end June 30, 2000, would be approximately $588,438. The Idaho USF would be able to meet its monthly obligations and handle any additional funding that may be authorized during the year.
The Commission finds that an increase to the surcharge rate is necessary to ensure that the fund will continue to operate for the benefit of universal telephone service in the state of Idaho. The Commission further finds that the MTS/WATS surcharge rate should be increased to $0.0035 per minute to provide a more reasonable reserve and to meet anticipated new disbursements. Moreover, this more fairly allocates the burden for funding USF between toll and basic local service customers. Pursuant to IDAPA 31.46.01.105, local exchange companies and MTS/WATS companies are authorized to impose these surcharges as of October 1, 1999.
O R D E R
IT IS THEREFORE ORDERED that the existing Universal Service Fund local exchange service surcharges shall be continued at $0.12 per month for each residential line and $0.24 per month for each business line. Local exchange companies shall continue to remit these surcharges to the USF Administrator.
IT IS FURTHER ORDERED that the existing Universal Service Fund MTS/WATS surcharge shall be increased to $0.0035 per access minute effective October 1, 1999. MTS/WATS companies shall remit the surcharge revenue to the Administrator.
IT IS FURTHER ORDERED that Albion Telephone Company, Fremont Telcom Company, Direct Communications and Rural Telephone Company reduce their respective access rates to the weighted statewide average of $0.053382 effective October 1, 1999.
IT IS FURTHER ORDERED that Cambridge Telephone Company, Inland Telephone Company and Midvale Telephone Company file plans with the Commission within twenty-eight (28) days of this Order indicating whether they intend to withdraw from participation in the Idaho USF or how they will bring rates into compliance with the statutory requirements.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally decided by this Order) or in interlocutory Orders previously issued in this Case No. GNR T-99-15 may petition for reconsideration within twenty-one (21) days of the service date of this Order with regard to any matter decided in this Order or in interlocutory Orders previously issued in this Case No. GNR-T-99-15. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. See Idaho Code 61 626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this day of August 1999.
DENNIS S. HANSEN, PRESIDENT
MARSHA H. SMITH, COMMISSIONER
PAUL KJELLANDER, COMMISSIONER
ATTEST:
Myrna J. Walters
Commission Secretary
O:gnrt9915_cc2
Silver Star (Order No. 27456), Fremont (Order No. 27657), Direct Communications (Rockland) (Order No. 27450), Albion (Order No. 27910) and Rural (Order No. 28114).
This does not include the recent decision granting USF support of $52,165 to Fremont Telcom. Order No. 28085, which total USF disbursements to $1,816,966.60.
ORDER NO. 28124 1
Office of the Secretary
Service Date
August 30, 1999