20020617_163.html

DECISION MEMORANDUM TO: COMMISSIONER KJELLANDER COMMISSIONER SMITH COMMISSIONER HANSEN JEAN JEWELL RANDY LOBB DON HOWELL LISA NORDSTROM LYNN ANDERSON BEVERLY BARKER RON LAW GENE FADNESS TONYA CLARK WORKING FILE FROM: TERRI CARLOCK DATE: JUNE 13, 2002 RE: ALBION TELEPHONE COMPANY'S REQUEST TO BORROW UP TO $15 MILLION; CASE NO. ALB-T-02-2. Albion Telephone Company (Albion) filed an Application requesting authority to borrow up to $15 Million from the Rural Telephone Utilities Service (RUS). The proposed RUS loan should qualify for the 5% hardship rate with a 15-year loan maturity. If not, the interest rate will be at RUS's then current market rate at the time of closing. The loan will be secured by a first mortgage lien on Albion's assets under a Supplemental Mortgage and Security Agreement. Proceeds of the loan will be utilized to: 1) upgrade central office switching, 2) install additional fiber and upgrade outside plant, 3) fund construction to meet anticipated customer growth, and 4) general system improvements. STAFF DISCUSSION AND RECOMMENDATION A portion of these loan funds will be used for non-regulated services. Staff continues to express concern about using regulated assets and operations to secure non-regulated activities. Any adjustments associated with non-regulated costs will occur in future rate cases. To monitor any loan covenants required by RUS, Staff recommends the following reporting requirements be included in the Order approving the Application: 1) Provide copies of the RUS final loan approvals including documentation for advances. 2) Provide a copy of any executed collateral documentation. 3) Provide copies of all annual certification, covenant reports, and letters regarding these determinations. 4) The "Report of Securities Issued". COMMISSION DECISION Should the Application be approved with Staff's recommended reporting requirements? _________________________ Terri Carlock TC:udmemos/alb-t-02-2decmemo.TC.doc