20000511Motion to Accept Stipulation.doc

CHERI C. COPSEY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, ID 83720-0074
Telephone: [phone]
FAX: [phone]
Idaho State Bar No. 5142

Street Address for Express Mail:
472 W. Washington Street
Boise, ID 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE JOINT APPLICATION OF MIDVALE TELEPHONE EXCHANGE, INC. AND SAWTOOTH TELEPHONE, INC. FOR AUTHORITY TO INCREASE RATES AND DISBURSEMENTS FROM THE IDAHO USF.

IN THE MATTER OF THE PETITIONS FROM CITIZENS IN WASHINGTON COUNTY REQUESTING EXTENDED AREA SERVICE (EAS) BETWEEN THE EXCHANGES OF MIDVALE TELEPHONE EXCHANGE, INC. AND THE CAMBRIDGE TELEPHONE COMPANY AND COMMUNITIES IN THE TREASURE VALLEY CALLING AREA OF U S WEST.
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CASE NOS. MID-T-99-1
SAW-T-99-1

CASE NO. GNR-T-99-11

MOTION TO ACCEPT
STIPULATION
AND SETTLEMENT
AGREEMENT

COMES NOW the Commission Staff, Midvale Telephone Company and Sawtooth Telephone Company (hereinafter referred to as “Midvale”), by an through their respective attorneys of record, and request that the Commission adopt the attached Stipulation and Settlement Agreement executed by the Staff, Midvale and Sawtooth Telephone Companies in the above referenced cases.
BACKGROUND
On September 28, 1999, Midvale filed a Joint Application requesting that the Commission authorize a general rate increase and requesting that Midvale’s disbursement from the state Universal Service Fund (USF) be increased to $479,519. In addition to proposing a general rate increase, Midvale proposed to implement several toll-free extended area service (EAS) routes, increase the rates for local services to partially pay for EAS, and bring long-distance access charges to the statewide average. On October 19, 1999, the Commission suspended the rates that are the subject of the Application for a period of thirty (30) days plus five (5) months from the proposed effective date of November 1, 1999, pursuant to Idaho Code § 61-622. Order No. 28179.
On December 10, 1999, Midvale filed revised testimony that substantially changed its calculation of the revenue deficiency and USF request proposing to increase its annual USF draw by $123,128 per year. On January 13, 2000, the Commission continued the suspension for an additional period of sixty (60) days, or until such time as the Commission may issue an Order accepting or rejecting or modifying the Application in this matter. Idaho Code § 61-622. Order No.  28249.
The Commission Staff and U S WEST filed direct testimony on April 5, 2000. U S WEST recommended EAS be granted for the Midvale exchange into the entire U S WEST Treasure Valley EAS Region. Staff recommended Midvale’s EAS request to the mini-region be granted but argued EAS for Stanley into Ketchum and Hailey be denied. Staff further argued that EAS to the entire U S WEST Treasure Valley EAS Region should be denied. The mini-region proposed includes Midvale’s Midvale exchange, U S WEST’s Payette and Weiser exchanges, and Cambridge’s Cambridge, Cuprum, Indian Valley and Council exchanges. Midvale also proposed Farmers Mutual Telephone Company’s Fruitland and Nu Acres exchanges be included. However, Farmers is a cooperative and not subject to the Commission’s jurisdiction.
Staff testified that if no EAS requests are granted Midvale’s USF draw should be decreased to $164,830. If EAS for the mini-region is granted, Staff recommended Midvale’s USF draw be increased to $252,582 and increased to $281,687 if EAS for the Stanley exchange into Ketchum and Hailey is also granted.
On April 24, 2000, at the request of the parties, the Commission vacated the technical hearing that had been scheduled to begin April 25, 2000, and vacated the date for filing rebuttal testimony. Order No. 28350. Settlement negotiations ensued. The parties exchanged underlying data and arrived at the following Stipulation and Settlement of some issues in the case on May 2, 2000.
On May 10, 2000, Staff filed Supplemental Testimony explaining the basis for the Settlement.
THE SETTLEMENT AGREEMENT
Although the parties agreed that the evidence supports a finding that there is a community of interest supporting EAS for the mini-region, the parties did not stipulate to a specific EAS route. Instead, the parties agreed that EAS for the Midvale exchange should be consistent with the Commission’s decision regarding EAS for the Cambridge exchange in CAMT-99-2/COU-T-99-2. They further agreed that the “mini-region” referred to in the Stipulation includes Midvale’s Midvale exchange, U S WEST’s Payette and Weiser exchanges, and Cambridge’s Cambridge, Cuprum, Indian Valley and Council exchanges. Midvale also proposed Farmers Mutual Telephone Company’s Fruitland and Nu Acres exchanges be included and the parties agreed that Midvale should be authorized to include Farmers Mutual Telephone Company’s Fruitland and Nu Acres exchanges provided Farmers agrees.
The parties also agreed that in those exchanges for which the Commission approves EAS, it is just and reasonable to set the rates for local exchange service at $24.10 per month for residential service and $42.00 per month business service. While this means that USF funds are supporting customer rates to allow EAS into the mini-region, the customers are paying for some of the costs for providing EAS. And in those exchanges for which the Commission does not approve EAS, the parties agreed that the Commission is required by Idaho Code § 62-610 to raise rates to the USF threshold rates, currently $21.28 per month for residential service and $39.77 per month for business service. Further, the parties agreed that Midvale’s access charges should be reduced to the statewide level as proposed in the Joint Application.
With those assumptions, the parties agreed to amortize rate case expenses over a 3-year period. However, the parties did not agree on the appropriate return on equity.
USF Draw in the absence of any EAS. Staff continues to maintain that the appropriate return is 11.75% and Midvale urges the Commission to adopt a 13% return on equity. However, the parties did agree that if the Commission does not approve EAS for any Midvale exchange, Midvale’s base revenue requirement computed at an 11.75% return on equity would decrease Midvale’s existing Idaho USF draw by $23,148 per year, assuming a two percent (2%) allocation for non-regulated activities, reflecting $2,000 for the effects of measured service buy-up and the proposed local service rates and access rates being implemented. The parties further agreed that if the Commission does not approve EAS for any Midvale exchange and adopts a 13% return on equity, the parties agree this would increase the $23,148 figure referred to above by approximately $3,900. As part of this agreement, the parties have agreed measured service will be offered and that its effect on annual revenue is assumed to be $2,000. The parties also agreed to use a two percent (2%) allocation for non-regulated activities as reasonable for use in this case only.
USF Draw if EAS is approved for the Midvale Exchange to the “mini-region.” If the Commission approves EAS for the Midvale exchange to the “mini-region,” as stipulated, the parties agreed that the cost for implementing EAS from the Midvale exchange to the “mini-region” is $186,044 per year which will result in an increase to Midvale’s yearly USF draw.
USF Draw if EAS is approved for the Midvale Exchange to the entire U S WEST Treasure Valley EAS Region. If the Commission approves EAS for the Midvale exchange to the entire U S WEST Treasure Valley EAS Region, parties agreed that the cost for implementing EAS from the Midvale exchange is an additional $104,937 per year above the cost for providing EAS into the mini-region which will result in an increase to Midvale’s yearly USF draw.
USF Draw if EAS is approved for the Stanley Exchange to the U S WEST Hailey and Ketchum Exchanges. If the Commission approves EAS for just the Stanley exchange to U S WEST Hailey and Ketchum exchanges, the parties agree that the cost for implementing EAS is $31,709 per year which will result in a corresponding increase to Midvale’s yearly USF draw.
The signatory parties strongly believe that this Stipulation and Settlement represents a reasonable resolution of issues in this case. As with any general rate case, the signatory parties recognize the complexity of the issues and the amount of effort and resources that would be expended by all parties in litigation if settlement does not occur. The Staff’s investigation and audit reveals that the proposed local service rates, the reduction of access charges, coupled with a decrease in USF payments if no EAS routes are approved and an increase in USF disbursement if EAS routes are approved do not produce excessive earnings. In the event that the Commission does not adopt this Stipulation, the Staff and Midvale each reserve their rights to fully litigate the issues encompassed in this Settlement
PRAYER
The signatory parties strongly believe that the Stipulation and Settlement represents a reasonable resolution of some of the issues presented in this case. Given the hearing schedule already adopted by the parties, the Staff has prefiled supplemental testimony supporting the Stipulation and Settlement and explaining the differences between its direct prefiled testimony and the Stipulation.
RESPECTFULLY SUBMITTED this day of May 2000.

Cheri C. Copsey
Deputy Attorney General

Midt991_sawt991_cc_mot-stip
On December 17, 1999, the Commission approved the merger of Midvale and Sawtooth. See Order No. 28233.
Prior to the merger, Sawtooth was not a USF recipient.

Midvale’s current annual draw is $195,020.

Joint Motion To Adopt Stipulation And Settlement Agreement 1