HomeMy WebLinkAbout28555.err.docBEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
MIDVALE TELEPHONE EXCHANGE, INC. FOR AUTHORITY TO GUARANTEE A LOAN FROM THE RURAL TELEPHONE FINANCE COOPERATIVE IN THE AMOUNT OF $480,000. )
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CASE NO. MID-T-00-1
ORDER NO. 28555
On October 11, 2000, Midvale Telephone Exchange Inc. (Midvale) filed an Application pursuant to Idaho Code § 61-909 for an exemption from Chapter 9, Title 61, of the Idaho Code with regard to Midvale’s guarantee of a $480,000 Rural Telephone Finance Cooperative (RTFC) loan to M & L Enterprises (M & L). In this Order we deny the exemption but approve the Application to guarantee the loan as conditioned below.
BACKGROUND
In its Application Midvale requests authority to guarantee a $480,000 loan from the RTFC to M & L. M & L Enterprises is an Idaho corporation, headquartered in Midvale, Idaho. M & L’s service area for the construction and operations of its proposed telecommunications is in north central Washington. M & L is owned by Lane and Mary Williams, owners of Midvale Telephone.
M & L is a registered telecommunications company with the Washington Utilities and Transportation Commission. The Washington application states M & L will serve unserved areas of Okanogan County, Washington. Most of the customers would be in the Qwest Oroville exchange and the Verizon Tonasket exchange. M & L’s local access rates are currently tariffed at $19.50 per month for residences and $25.00 per month for businesses. M & L is exempt from most regulatory requirements in Washington, including approval for securities, because it serves less than 2% of the access lines in Washington. RCW 80.04.530 and 80.08.160. As such, the Washington registration order in Docket UT-000943 dated 6/29/00 states “In this proceeding, the Commission in no way endorses the financial viability of applicant nor the investment quality of any securities it may issue.”
As a condition of the loan, RTFC is requiring a guarantee from Midvale for the $480,000 loan because there is common ownership by Lane and Mary Williams of both Midvale and M & L. As represented in the Application, M & L needs to begin construction immediately in order to install facilities before the onset of winter. Due to these time constraints, Midvale requests exemption from the Idaho securities requirement or, in the alternative, a fast resolution. The terms of the loan between RFTC and M & L will be established at closing but will likely include a fixed or variable rate option and the requirement that M & L purchase Subordinated Equity Certificates equal to 10% of each loan advance, with a prepayment fee of 50 basis points on the amount prepaid. Prior to each advance M & L must certify it has made an equity contribution to the project or that Midvale has made an equity contribution to M & L. During the first 12 months following the initial advance, an additional equity amount of $320,000 must be invested.
In its review of the Company’s Application, Staff expressed concern about using regulated assets to secure non-regulated activities. Although these non-regulated activities may initially increase the risk to Midvale, engaging in non-regulated activities is becoming more common place. Staff recommended that the Commission provide safeguards to protect Idaho’s regulated customers. These safeguards would include removing the impact of any loan guarantee and any default payments from regulatory consideration in Idaho. The Idaho customers should not bear any costs from this transaction. If any default payment pursuant to the guarantee is made, Midvale should be directed to record it as a shareholder responsibility and remove the impact from any rate case or audit related to Idaho regulated operations. Staff also recommended that Midvale file the following with the Idaho Public Utilities Commission for Midvale and M&L:
The “Report of Securities Issued” required by 18 CFR 34.10;
Verified copies of any Agreement entered into pursuant to this Order;
A copy of the RTFC’s final due diligence investigation report or information available to be determined by discussion between Staff and Midvale;
A copy of the executed collateral documentation;
Copies of all annual certification, covenant reports, and letters regarding these determinations; and
Copies of letters and approval by RTFC of any future assignment of any portion of the loan to a subsidiary.
We find that it is reasonable and appropriate to approve the Application conditioned upon the Staff’s recommendations. The conditions are in the public interest of Idaho customers. The adoption of the reporting requirements will allow the Idaho Public Utilities Commission to monitor events concerning this loan and its guarantee of non-regulated activities.
FINDINGS OF FACT
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CONCLUSIONS OF LAW
Midvale is a telephone corporation within the definition of Idaho Code § 61 121 and is a public utility within the definition of Idaho Code § 61 129.
The Idaho Public Utilities Commission has jurisdiction over this matter pursuant to the provisions of Idaho Code § 61 901 et seq., and the Application reasonably conforms to Rules 141-150 of the Commission’s Rules of Procedure, IDAPA 31.01.01.141-150. The Commission further finds that this matter should not be processed as an exemption.
The general purposes to which the loan proceeds will be put are lawful purposes under the Public Utilities Law of the State of Idaho and are compatible with the public interest. However, this general approval of the general purposes to which the proceeds will be put is neither a finding of fact nor a conclusion of law that any particular construction program of Midvale which may be benefited by the approval of this Application has been considered or approved by this Order, and this Order shall not be construed to that effect.
The issuance of an Order authorizing the proposed guarantee does not constitute agency determination/approval of the type of guarantee or the related costs for ratemaking purposes, which determination the Commission expressly reserves until the appropriate proceeding.
Midvale has paid the fees required by Idaho Code § 61 905.
The Commission finds that this Application should be approved as conditioned by the booking and reporting requirements.
O R D E R
IT IS THEREFORE ORDERED that Midvale Telephone Exchange’s Application pursuant to Idaho Code § 61-909 for an exemption from Chapter 9, Title 61, of the Idaho Code with regard to Midvale’s guarantee of a $480,000 Rural Telephone Finance Cooperative (RTFC) loan to M & L Enterprises (M & L) be denied.
IT IS FURTHER ORDERED that Midvale’s Application to guarantee the $480,000 Rural Telephone Finance Cooperative loan to M&L Enterprises be, and the same is hereby granted as conditioned above. In particular, Midvale’s shareholders shall be responsible for any default payments. Any default payment shall be booked below the line.
IT IS FURTHER ORDERED that this authorization is without prejudice to the regulatory authority of this Commission with respect to rates, service, accounts, valuation, estimates, or determination of costs, or any other matter that may come before this Commission pursuant to this jurisdiction and authority as provided by law.
IT IS FURTHER ORDERED that nothing in this Order and no provision of Chapter 9, Title 61, Idaho Code, or any act or deed done or performed in connection with this Order shall be construed to obligate the State of Idaho to pay or guarantee in any manner whatsoever any security authorized, issued, assumed, or guaranteed under the provisions of Chapter 9, Title 61, Idaho Code.
IT IS FURTHER ORDERED that Midvale shall file, as they become available, the reports, documents and other reporting information set out in the body of this Order:
IT IS FURTHER ORDERED that issuance of this Order does not constitute acceptance of Midvale's exhibits or other material accompanying the Application for any purpose other than the issuance of this Order.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally decided by this Order) 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. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration in response to issues raised in the petition for reconsideration. See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this day of October 2000.
DENNIS S. HANSEN, PRESIDENT
MARSHA H. SMITH, COMMISSIONER
PAUL KJELLANDER, COMMISSIONER
ATTEST:
Jean D. Jewell
Commission Secretary
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
MIDVALE TELEPHONE EXCHANGE, INC. FOR AUTHORITY TO GUARANTEE A LOAN FROM THE RURAL TELEPHONE FINANCE COOPERATIVE IN THE AMOUNT OF $480,000. )
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CASE NO. MID-T-00-1
ERRATUM NOTICE
On October 20, 2000, the Commission issued Order No. 28555. The following change should be made to that Order:
Page 2, paragraph 2, Item No. 1.
READS:
“1 The ‘Report of Securities Issued’ required by 18 CFR 34.10;”
SHOULD READ:
“1 A report of securities issued;”1
The effective date of Order No. 28555 remains October 20, 2000.
1The report of securities issued can be satisfied with a written verification of each amount funded with the specifics of the advance included.
DATED at Boise, Idaho this day of October 2000.
_________________________________
Jean D. Jewell
Commission Secretary
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ORDER NO. 28555 5
Office of the Secretary
Service Date
October 23, 2000
Office of the Secretary
Service Date
October 25, 2000