28511.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF INLAND TELEPHONE COMPANY’S APPLICATION FOR AUTHORITY TO INCREASE RATES AND DISBURSEMENTS FROM THE IDAHO USF. )
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) CASE NO. INL-T-99-2

ORDER NO. 28511

Inland Telephone Company (Inland) on December 21, 1999, filed an Application to increase its rates and the amount it receives annually from the Idaho Universal Service Fund (USF). Inland is an independently owned local exchange telecommunications company that provides services in eastern Washington and northern Idaho. Inland is subject to the regulatory jurisdiction of the Commission pursuant to Title 61, Idaho Code. Inland’s customer rates have not increased since 1991, when the Commission last determined its revenue requirement in a general rate case. By this Order, the Commission approves increases in Inland’s basic service rates to the levels required by law for companies that receive USF funds, and decreases the annual amount Inland receives from the USF.
In its Application, Inland alleged that its annual revenue requirement, based on a calendar 1998 test year, has increased $296,711 over the revenue requirement approved in its last rate case. Inland proposed to increase its local exchange rates and access charges to the rates approved by the Commission for telephone companies that receive USF funds. Idaho Code § 62-610(3)(a) requires that the rates of a USF recipient be “in excess of 125% of the weighted statewide average rates for residence and business local exchange service rates for one-party single-line service….” Inland proposed to increase its rates over a three-year period to the levels required for USF recipient companies. Inland also proposed, based on its higher revenue requirement and the proposed rate adjustments, to increase its funding from the USF in the amount of $291,383 in the first year, $282,497 in the second year, and $273,573 each year thereafter. Inland’s disbursement from the USF during the 1998 test year was $55,161.
Following completion of an audit, Staff filed testimony on July 19, 2000, in which Staff identified several issues disputed by Staff in Inland’s revenue requirement. Thereafter, Inland and Staff met to discuss the differences, which resulted in the preparation of a Joint Settlement and Stipulation Agreement. Staff filed supplemental testimony on August 23, 2000, to support the Stipulation, which purports to settle all of the rate and revenue requirement issues for Inland.
The Stipulation is simple in its resolution of the significant issues in this case. The Stipulation provides for “a reduction in Inland’s annual draw from the USF in the amount of $12,000, resulting in Inland’s revenue requirement of $408,264.” Inland also agreed to “increase its local basic service rates to the threshold rates required by Idaho law to companies receiving funds from the state USF.” Those rates are identified as $21.63 for local residential service, $40.68 for local business service, and an access rate of $.054486.
The Commission convened two hearings in this case to consider the evidence. The first, a technical hearing, convened on August 28, 2000. A public hearing was convened in Moscow, Idaho on August 30, 2000. During the technical hearing, the prefiled testimony was spread upon the record and the Stipulation was admitted as Exhibit 107. In addition, although it was not part of the prefiled testimony, Inland stated that it was willing to provide a local measured service option for residential customers. The rate for local measured service was identified as $16 per month, to include 90 minutes calling time, with each additional minute being billed at $.03 per minute.
The Commission finds that the Stipulation is an appropriate resolution of the issues in this case and therefore approves it. The rates identified for local service are the rates required by Idaho Code § 62-610(3)(a) for companies that receive funds from the state USF. That Section requires rates of a company receiving USF funds to be “in excess of one hundred and twenty-five percent (125%) of the weighted statewide average rates for residential and business local exchange service rates for one-party single line service respectively….” The rates adopted in the stipulation and approved by the Commission are the minimum rates for a telephone company to remain eligible to receive USF support. Those rates were approved by the Commission in Order No. 28492 issued August 29, 2000, as being just, fair and reasonable for customers of companies that receive USF funds.
In addition, the Commission approves the implementation of a local measured service option for residential customers. Local measured service is an appropriate cost saving alternative for customers that make relatively few calls per month. The Commission finds the proposed rate of $16 per month for local measured service, including 90 minutes free calling, and a rate of three cents per minute per call thereafter, to be reasonable, just and appropriate.
In addition to the benefit of local measured service, some customers may also benefit from the Idaho Telephone Service Assistance Program (ITSAP). ITSAP provides a billing credit of up to $10.50 per month for flat-rate unlimited local calling and is available for low-income residential customers. Tr. p. 29.
O R D E R
IT IS HEREBY ORDERED that the Joint Settlement and Stipulation of Inland Telephone Company and Staff is approved. Following notice to customers, Inland shall increase its local basic service rates to the threshold rates required by Idaho law for USF recipient companies. Those rates are $21.63 for basic local residential service, $40.68 for basic local business service, and an access rate of $.054486.
IT IS FURTHER ORDERED that Inland shall implement a local service option for its residential customers. The rate for local measured service shall be $16 per month, which shall include 90 minutes calling time, and $.03 per minute for calling time in excess of 90 minutes per month.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for reconsideration within twenty-one (21) days of the service date of this Order. 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 September 2000.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Myrna J. Walters
Commission Secretary

vld//O:INL-T-99-2_ws2

DISSENTING OPINION OF
COMMISSIONER MARSHA H. SMITH
CASE NO. INL-T-99-2

Although I concur with the majority decision with respect to most issues in this case, I do not concur with the rates for basic local exchange service. The decision of the majority does not reflect the substantial difference between the local calling areas of Inland Telephone’s two Idaho exchanges. Customers in the Lenore exchange benefit from having a local calling area that has been expanded beyond its own small wire center to include the Lewiston and Lapwai exchanges. In contrast, customers in the Leon exchange do not have the benefit of local calling beyond its small wire center of Uniontown, Washington.
In similar cases previous to this one, the Commission decided that it was appropriate for customers in exchanges with small local calling areas to have lower monthly rates than customers in exchanges with larger local calling areas. For example, as a result of two other recent cases involving USF-recipient companies, Midvale Telephone and Rural Telephone, this Commission determined that customers who benefit from expanded calling areas should have higher rates than customers who do not have the same benefit. (Order Nos. 28420 and 28114, respectively.) Application of this rate design principle has not been limited to whether or not an exchange has any expanded local calling area. In a recent Century Telephone case, rates for customers with expanded but smaller local calling areas were set by this Commission at levels below those for exchanges with much larger local calling areas. (Order No. 28340.) For another example, Qwest’s Burley exchange, even with its local calling area expanded to several other exchanges, has rates set by this Commission that are several dollars lower than the rates for exchanges that benefit from much larger, regional local calling areas.
Regarding the statutory requirement that USF-recipient companies’ local rates must be at least 125% of the statewide average, Idaho Code § 62-610(3)(a) is very clear in stating that recipient companies’ average local exchange rates must meet the threshold. If the legislature had wanted to ensure that every exchange’s rates or even every customer’s rates met the threshold, it could easily have said so, but it did not.
I believe it was the intent of Congress and the Legislature that all telephone customers have reasonably comparable rates and service. In cases where it has not been economically feasible to expand local calling to be comparable to other exchanges in the state such as Leon, it is reasonable and equitable to recognize this lower value of service through lower rates. Customers with the smaller local area pay more for toll access on a call-by-call basis and it logically follows that customers with the larger local area should have higher local rates so that they pay approximately the same proportion of their total costs as those in the smaller areas. This Commission has almost always adopted this rate design principle in the past and I see no reason for it to abandon this principle in the present case.
Today's Order signed by the majority contains a footnote that states neither of the parties in this case presented evidence to support lower rates for customers in Leon. However, at the hearing held in Boise on August 28, 2000, I specifically asked Staff witness Carolee Hall if the Commission has in the past recognized calling area differences in rates. Ms. Hall answered that we have. Tr. at 81. Admission that the Commission has found in the past that local calling area size is a reasonable determinant for design of local rates is sufficient evidence for the Commission to do so in this case. I hope the Commission is not now suggesting that decisions that are fair, reasonable and in the public interest can only exist within the bounds of what is actively proposed and supported by parties within each particular case. To be so bound would greatly expand the power of parties at the expense of limiting the Commission's discretionary authority.
The footnote in the Order also states that this case does not involve consideration of extended area service (EAS). Ironically, that is exactly my point. EAS does, in fact, exist for Lenore customers and does not for Leon customers. Consideration of this significant existing difference should be reflected in a rate differential between Leon and Lenore, but by today's majority decision it is not. I hope and assume that the footnote is not intended to suggest that only new or future EAS should result in rate differentials. This is not consistent with previous decisions, e.g. Burley's rates cited above, and to do so would be discriminatory.
I respectfully dissent from the decision of the majority with regard to the rates established for Leon.

MARSHA H. SMITH, COMMISSIONER

We note that Section 62-610(3)(a) requires a company’s average rates to meet the threshold rates. Some customers’ rates could be lower than the threshold rates so long as other customers’ rates are higher to bring the average rates to the statutorily required level. Although the Commission has some discretionary authority when establishing rates, neither of the parties in this case presented evidence to support lower rates for Inland’s Leon customers. Nor does this case involve a consideration of extended area service.

ORDER NO. 28511 4

DISSENT 1

Office of the Secretary
Service Date
September 28, 2000