28958.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF RURAL TELEPHONE COMPANY FOR AN INCREASE IN ITS ANNUAL USF FUNDING. )
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CASE NO. RUR-T-01-1

ORDER NO. 28958

On May 30, 2001, Rural Telephone Company (Rural) filed a Motion for an Order to increase the amount it receives each year from the Idaho Universal Service Fund (USF). Rural’s request for increased USF support followed implementation of extended area service (EAS) local calling area approved by the Commission between Rural’s exchanges and Qwest’s Boise calling area. See Order No. 28114, Case No. GNR-T-97-9. When it approved the EAS, the Commission stated Rural must recover some of the implementation costs through higher rates, but also recognized that some EAS costs might be recovered through increased USF support.
Rural increased local rates as directed by the Commission, and asserts in its Application that the resulting increase in revenue is not sufficient to cover the costs of implementing the EAS. Rural initially requested an increase in annual USF funding in the amount of $125,562. The Company subsequently revised its request after reviewing and discussing with Staff the effect of a Federal Communications Commission order issued in May 2001. In late August 2001, Rural revised its request to an additional $81,043 per year.
On January 15, 2002, the Commission issued a Notice of Application and Notice of Modified Procedure. Written comments were filed by the Commission Staff; Rural filed reply comments on February 7, 2002. According to Staff’s comments, after completing an audit, Staff concluded Rural was entitled to an increase of $57,535.69 per year from the USF. The Company and Staff subsequently reached an agreement that Rural’s USF funding should be increased by $68,274 per year ($5,689.50 per month), as reflected in the parties’ comments. Although there is no dispute regarding the amount that Rural is entitled to receive from the USF, the parties did not agree on the effective date that the increase should begin.
Staff identified four options for the beginning date of increased payments to Rural, including the date the Commission issues an order approving increased USF funding. Considering Rural’s expectation in recovery of its EAS costs, Staff recommended the effective date of increased USF funding should be no earlier than July 30, 2001, the earliest date the Commission could have acted on Rural’s Application. In its reply comments, Rural asserted that “there is simply no excuse for a one year delay between an EAS cutover and recovery of the resultant revenue deficiency,” and requested recovery of EAS funds to the EAS cutover date, February 14, 2001.
The agreement of the Company and Staff as reflected in their comments is that Rural is entitled to receive an additional $5,689.50 per month from the USF for 36 months, which includes amortization of the case costs. Then, after full recovery of the case costs over the amortization period, the monthly amount is reduced to $4,833.83. If February 14, 2001 is the effective date for the increase in monthly USF payments, Rural would be entitled to the larger monthly distribution starting in March 2001. Rural would receive a one-time payment of $68,274, representing the first 12 monthly payment amounts (March 2001 through February 2002), and 24 more months of the $5,689.50 increase before payments are reduced following recovery of case costs. If Staff’s recommendation is adopted, the Company would receive a lump sum payment of $45,516 (for eight months—July 2001 through February 2002—of the higher payment amount), then 28 more months at the $5,689.50 increase before the payments are reduced to $4,833.83, removing the component for recovery of case costs.
The Commission approves Rural’s recovery of its EAS costs, effective February 14, 2001, the date the EAS was implemented. There is no dispute that Rural reasonably incurred the costs, and that the costs were expended by December 2000. It also is undisputed that the Company reasonably expected to recover from the state Universal Service Fund its costs not recovered through increased customer rates. On this record, and there not being a significant difference in the result between the effective dates recommended by Staff and the Company, the Commission approves the effective date requested by the Company. Rural is entitled to an increase in its monthly USF draw, starting March 2001. The Company shall receive a monthly increase of $5,689.50 for 36 months, and thereafter the monthly increase amount shall be $4,833.83. To become current, the USF administrator may pay a lump payment of $68,274 to Rural, representing the first 12 months of increased payments from March 2001.
O R D E R
IT IS HEREBY ORDERED that Rural shall receive an increase in its monthly USF draw, starting with the March 2001 payment. The Company is entitled to receive a monthly increase of $5,689.50 for 36 months, and thereafter the monthly increase amount shall be $4,833.33. To become current, the USF administrator shall pay a single payment of $68,274 to Rural, representing the first 12 months of increased payments from March 2001 through February 2002. Rural is entitled to the increase of $5,689.50 for another 24 months, from March 2002 through February 2004. Beginning March 2004, the monthly amount Rural receives from the USF shall be reduced by $855.67.
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 § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of February 2002.

PAUL KJELLANDER, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

DENNIS S. HANSEN, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

bls/O:RURT011_ws2
ORDER NO. 28958 1

Office of the Secretary
Service Date
February 26, 2002