20141028final_order_no_33158.pdf

Office of the Secretary
Service Date
October 28,2014
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF OREGON-IDAHO UTILITIES,INC.TO )CASE NO.ORE-T-14-O1
INCREASE ITS MONTHLY RESIDENTIAL )
RATE FOR TELEPHONE SERVICE )ORDER NO.33158
________________________________________________________________________________________
)
On July 17,2014,Oregon-Idaho Utilities,Inc.requested authority to gradually
increase its monthly residential rate for local exchange telephone services over a four-year
period.The purpose of the proposed rate increase is to match the annual increases in the federal
universal service threshold set by the Federal Communications Commission (FCC),effective
July 1,2014.’
On August 5,2014,the Commission issued a Notice of Application regarding the
Company’s request.On September 5,2014,the Commission issued a separate Notice of
Modified Procedure requesting written comments be submitted no later than October 9,2014.
Order Nos.33087,33115.Commission Staff was the only party to file comments.Based upon
our review,we grant the Application as set out below.
BACKGROUND
Oregon-Idaho serves four local exchanges in southeastern Oregon and southwestern
Idaho that it purchased from Contel of the West in 1990.In its Idaho service territory —
designated as the South Mountain exchange —the Company serves a total of 81 access lines
covering 2,126 square miles.According to the Company,about 30%of its Idaho customers have
“no access to commercial power,rely on gas lamps,lanterns and/or low-grade solar for lighting
and obtain heat via wood or oil burning stoves.”Application at 2.
Oregon-Idaho has not increased its Idaho residential rate since 1990.Id.at 3.The
Company receives federal high-cost support from the federal Universal Service Fund (USF),but
does not participate in the Idaho USF program.Id.
In the Matter of Connect America Fund,Report and Order,Declaratoiy Ruling,Memorandum Opinion and Order,
Seventh Order on Reconsideration,and Further Notice ofRulemaking,29 FCC Rcd 7051,2014 WL 2599362 (June
10,2014)(the “CAF-JI Order”)at 9191 75,80,85.
ORDER NO.33158 1
In 2011,the FCC set out to reform the federal USF by creating the Connect America
Fund (CAF).2 In 2014,the FCC issued its Connect America Fund —Phase II Order (CAF-Il
Order),establishing the basis for providing federal high-cost support to rate-of-return carriers,
such as Oregon-Idaho.In that order,the FCC set the monthly rate floor for CAF-Il funding at
$16.00 per month for local service (including state regulated fees),effective December 1,2014.
CAF-Il Order at ¶91 80,85 (excludes Lifeline customers (n.156)).The eligibility threshold rate to
receive the CAF-Il funding will increase each year until it reaches $20.46 per month effective
July 1,2017 through June 30,2018.Id.at ¶80.Carriers with monthly rates that fail to meet or
exceed this rate floor will have their federal funds reduced proportionally on a dollar-for-dollar
basis.Id.at9[9[80-81.
To meet the FCC’s monthly rate floor and thus maintain eligibility for CAF-Il
funding,Oregon-Idaho proposes to increase its single-party residential monthly rate (before
inclusion of state regulated fees)as follows:
DATE RATE PERCENTAGE INCREASE
Current Rate $15.77 —
December 1,2014 $16.00 1.5%
Junel,2016 $18.00 12.5%
Junel,2017 $20.00 11%
Application at 5,Exh.No.3.Based on the current number of residential lines,the Company
reports that the proposed rate increase would generate approximately $2,800 in annual revenues
when fully implemented in 2018.Application at 6.
Oregon-Idaho notified each of its customers about the proposed rate increase in
mailings sent July 17 and September 8,2014,and a press release issued July 30,2014.See Exh.
No.3;Comments at 4-5.
STAFF COMMENTS
Staff performed an audit of Oregon-Idaho’s 2013 financial records.Staff noted that
there is a range for reasonable revenue requirements.That range depends on factors,including:
return on equity;allocation variables between Oregon and Idaho functions;expense levels;and
prudence of all investments.Comments at 3.Using the allocation factor provided by Oregon-
Idaho,Staff calculated a reasonable annual revenue requirement to be between $365,741 and
2 USF/ICC Transformation Order Connect America Fund;National Broadband Plan for Our Future,et seq.,Report
and Order and Further Notice of Proposed Rulemaking,26 FCC Rcd 17663 (2011)(the “Transformation Order”).
ORDER NO.33158 2
$372,792.Staff determined the Company’s 2013 Idaho revenues were $371,226,which is within
that range of reasonableness.Comments at 3.
According to Staff,Oregon-Idaho’s access rates will decline over the next five years,
as required by the FCC’s Transformation Order.Id.By 2016,revenues from those rates will be
eliminated and transitioned to a “bill and keep”arrangement between carriers.Id.Currently,the
Company’s access revenues account for over 50 percent of its total revenues.Id.With declining
access revenues,the proposed residential rate increase will help off-set this decline and provide
some stability to potentially avoid seeking assistance from the Idaho USF.Id.
Staff observed that the proposed rate of $20.00 on June 1,2017,is lower than the
2013 statewide average residential rate of $21.73.See Order No.32883;Comments at 3-4.Staff
determined that the Company-proposed increases will not create substantial over-earning for
Oregon-Idaho during the phase-in period.Comments at 4.Thus,Staff supports the Company’s
proposal to gradually increase the rate over four years,so as to avoid rate-shock to customers.
Because Oregon-Idaho operates in both Idaho and Oregon,Staff had some allocation
concerns.Staff asked the Oregon Public Utilities Commission staff whether Oregon-Idaho had
filed a similar rate increase case there.The Oregon staff indicated that Oregon does not regulate
companies with fewer than 50,000 lines.On review of current Oregon rates,Staff noted that the
Company’s residential rates in Oregon comply with the current rate floor requirements for this
year.3 Id.
As to customer relations,Staff noted that Oregon-Idaho’s press release and customer
notice did not include all information required by the Commission’s Rule 125,IDAPA
3 1.01.01.125.Specifically,the notice and press release did not provide the dollar amount
requested,did not inform customers they could file comments with the Commission,and did not
advise customers that they may subscribe to the Commission’s “RSS feed”to receive periodic
updates about the case via e-mail.See Rules 125.01 and 125.04.A second notice mailed by the
Company on September 8,2014,informed customers they could file comments with the
Commission,request a hearing,and subscribe to the Commission’s RSS feed.In light of
revisions to the Commission’s Rules of Procedure about customer notice that became effective in
Oregon-Idaho’s Oregon rate structure has three zones.Including the assessed fees,the monthly residential rates
are:Zone 1,$14.60;Zone 2,$16.35;and Zone 3,$21.60.Comments at 4,n.3.
ORDER NO.33158 3
February 2014,Staff recommended that Oregon-Idaho review the updated rules and include all
required information in future customer notices and press releases.Comments at 4.
In summary.Staff recommended the Commission approve Oregon-Idah&s proposed
increase in residential rates to preserve its federal CAF funding.The Company did not file any
reply comments.
COMMISSION DECISION AND FINDINGS
The Commission has reviewed and considered the record in this case,including the
Application,with three attached exhibits,and the Staff comments.Based upon our review,we
find Oregon-Idaho’s request to gradually increase its rates for monthly residential service is
necessary to maintain its federal CAF funding.Failure to maintain the minimum monthly rates
for continued CAF eligibility would result in a reduction in the Company’s federal funds.
Consequently,the current monthly rate is insufficient to maintain eligibility to receive future
federal funds under the CAF program.Idaho Code §6 1-502,6 1-622(1).We also note that no
customer opposed the proposed annual increases.Thus,we find the proposed increase in
residential rates over the four-year period as set out in the Application is just and reasonable.
Idaho Code §61-502,61-503.
ULTIMATE FINDINGS OF FACT AND
CONCLUSIONS OF LAW
Oregon-Idaho Utilities is a telephone corporation providing telecommunications
services as defined in Title 61 of the Public Utilities Law.Idaho Code §61-121,61-129.
The Idaho Public Utilities Commission has jurisdiction over Oregon-Idaho Utilities
pursuant to its authority under Title 61 of the Public Utilities Law.Idaho Code §§61-502,61-
622.
We find that Oregon-Idaho’s current monthly rate for residential telephone service is
insufficient to maintain eligibility to receive federal CAF-Il support.Z4F-JI Order at ¶J 80,85;
Idaho Code §61-502.We further find that Oregon-Idaho’s proposed increase in its monthly
residential rates over four years to meet the FCC’s rate floor and maintain eligibility for CAF-lI
funding,is just and reasonable.Idaho Code §6 1-503,62-622.
ORDER
IT IS HEREBY ORDERED that Oregon-Idaho Utilities’Application to increase its
monthly residential rates for telephone services over a four-year period is approved.
ORDERNO.33158 4
IT IS FURTHER ORDERED that Oregon-Idaho’s tariff Sheet No.301 and First
Revised Sheet No.301 included as Exhibits I and 2 to the Application are approved effective
December 1,2014,and thereafter as set out in Exhibits 1 and 2.
IT IS FURTHER ORDERED that the Company review and comply with the
customer notice provisions contained in the Rules of Procedure,IDAPA 31.01.01.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §6 1-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of October 2014.
MARSHA H.SMITH,COMMISSIONER
MACK A.REDFo$JD:CoMMISSIONER
ATTEST:
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Jean D Jewell
Cmmission Secretary
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ORDERNO.33158 5