HomeMy WebLinkAbout19991210Decision Memo.docDECISION MEMORANDUM
TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
MYRNA WALTERS
RON LAW
TONYA CLARK
LYNN ANDERSON
DON HOWELL
STEPHANIE MILLER
JOE CUSICK
SYD LANSING
TERRI CARLOCK
DOUG COOLEY
JUDY STOKES
WORKING FILE
FROM: CHERI C. COPSEY
DATE: DECEMBER 10, 1999
RE: IN THE MATTER OF THE JOINT APPLICATION OF MIDVALE TELEPHONE EXCHANGE, INC. AND SAWTOOTH TELEPHONE, INC. FOR AN ORDER AUTHORIZING THE MERGER OF THE COMPANIES – CASE NOS. MID T 99 2 AND SAW-T-99-2
On September 29, 1999, Midvale Telephone Exchange, Inc. and Sawtooth Telephone, Inc. filed a Joint Application requesting authority for Midvale and Sawtooth to merge with Midvale being the surviving corporation.
On November 8, 1999, the Commission issued a Notice of Application and Modified Procedure requesting comments on the proposed merger be filed by November 29, 1999. Order No. 28195. On November 29, 1999, only Staff filed comments.
Midvale provides service to Yellow Pine, Warren, Warm Lake, Midvale and Lakeside. Sawtooth is the subsidiary of Midvale and provides basic local exchange service in the Stanley exchange. Midvale owns all of Sawtooth’s common stock.
APPLICATION
The Applicants state that Sawtooth was created as a Midvale subsidiary to acquire the Stanley exchange from U S WEST Communications, Inc. pursuant to a 1994 asset purchase agreement. One of the conditions of the sale required the purchaser to maintain U S WEST’s then applicable local exchange rates for three (3) years. The Applicants state this creates a regulatory disparity between Midvale, whose rates are based on a traditional rate of return regulation, and the Sawtooth properties where rates are not cost based. Applicants claim that the original rationale for operating Sawtooth as a separate subsidiary is no longer valid. The rate freeze imposed by the agreement has expired and the Federal Communications Commission now treats both companies as a single entity for federal USF purposes.
The Applicants claim that merging Sawtooth and Midvale will allow the companies to realize cost savings from the elimination of duplicate functions such as separate books of account and separate tariff filings. The Applicants claim that the merger will eliminate the regulatory costs associated with the investigation and resolution of the proper allocation of joint and common costs between the two companies. According to the Application, there will be no change in the control or operation of either company. Finally, the Applicants state that the merger is revenue neutral and will not affect either company's rates. Both jointly filed a rate case and EAS proposal on September 28, 1999. See MID-T-99-1/SAW-T-99-1. As a result, the Applicants stated they intend to file a single tariff and combine rates if the Commission orders that at the conclusion of the rate case.
The Applicants also request that Sawtooth’s Certificate of Public Convenience and Necessity be transferred to Midvale.
STAFF COMMENTS
On November 29, 1999, Staff filed comments in response to Order No. 28195. Staff stated that there is no evidence that the merger of the two corporations will disadvantage customers as a whole. The accounting cost reductions should actually result in lower USF draws than might otherwise occur absent the merger. Staff stated they believe the merger is in the public interest.
STAFF RECOMMENDATION
Staff recommends the Commission approve the Application as filed.
COMMISSION DECISION
Does the Commission want to approve this Application?
_________________________________
Cheri C. Copsey
Staff: Terri Carlock
Doug Cooley
Judy Stokes
M:midt992-sawt992_cc3
DECISION MEMORANDUM 1