20011022Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
RON LAW
JEAN JEWELL
DON HOWELL
RANDY LOBB
JOE CUSICK
BEVERLY BARKER
GENE FADNESS
TONYA CLARK
WORKING FILE
FROM:ALDEN HOLM
TERRI CARLOCK
DATE:OCTOBER 22,2001
SUBJECT:MIDVALE TELEPHONE EXCHANGE'S APPLICATION TOBORROW$5,692,309 DEBT;CASE NO.MID-T-01-2.
RECOMMEND:APPROVAL WITH CONDITIONS
Midvale TelephoneExchange,Inc.(Midvale;Company)requests authority to borrow
$5,692,309in Rural Utilities Service (RUS)loans.The funds will be used to reimburse general
funds expended for work that is already completed and that will be completed soon.The loan
has been approvedby RUS with an interest rate of five percent (5%).
The proposed loan proceeds will be used for and will partially reimburse general funds
for the followingprojects:(1)extension of service to new customers,(2)the upgrade and
replacement of inside and outside plant for the Stanley and Midvale exchanges in Idaho and the
Cascabel,Arizona exchange,(3)the formation of three new exchanges (Millsite,Rio Verde and
Silver Bell)in previouslyunserved areas in Arizona,and (4)related purposes.The expenditures
per exchange and general areas total $861,245 in Midvale,$658,610 in Stanley,$1,000,494 in
Cascabel,$893,133 in Millsite,$666,843 in Rio Verde,$600,765 in Silver Bell,$50,000 in
permits and $961,218 in engineeringfees.Of the $5,692,309 total proceeds,$1,519,855 is
projected to be used in Idaho.According to the Company,all of the loan proceeds will be used
for only regulatedprojects.However,when Staff asked why the loan application clearly shows
DECISION MEMORANDUM l OCTOBER 22,2001
that at least a portion of the proceeds will be used to fund Syringa items,the Company stated that
Syringa will simply lease portions of the fiber extensions and sonet equipment,but that Midvale
will own the installations.Any regulatorytreatment for projects associated with Syringa have
not yet been addressed.Staff recognizes benefits associated with these projects but reminds the
Company that Staff will make adjustments for unregulateditems in any rate proceeding.Staff
will monitor the Syringa activity,switch credit,direct assignments,allocation and separation
factors for ratemaking purposes.
According to the Company,the loan application has been submitted to and approved by
RUS with the only stipulation being that the Company purchase from the standard materials list.
Midvale states that 85%of the work in Idaho is already finished and all the upgrades will be
made by late spring or early summer of2002.The work in Arizona will begin as soon as the
permitting process is completed this winter.
STAFF RECOMMENDATION
Staff recommends approval of this loan request conditioned on the same restrictions and
filingrequirements made by RUS.Midvale should be required to file with the Commission Staff
copies of the final loan documents and all required filings with the RUS as they are completed.
Annual statements reflectingtotal balances outstanding and mortgage compliance calculations
should also be filed with the Commission Staff.
COMMISSION DECISION
Should the request be approved with the above conditions?
Should copies of all documents filed with RUS be filed with the Commission Staff?
Alden Holm
AH:gdk:i:udmemos/mid-t-01-2decision memo
DECISIONMEMORANDUM 2 OCTOBER 22,2001