19991129Comments.doc

CHERI C. COPSEY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5142

Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF MIDVALE TELEPHONE EXCHANGE, INC. AND SAWTOOTH TELEPHONE COMPANY FOR AN ORDER AUTHORIZING THE MERGER OF THE APPLICANT COMPANIES. )
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CASE NO. MID-T-99-2
SAW-T-99-2

COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its attorney of record, Cheri C. Copsey, Deputy Attorney General, in response to Order No. 28195 issued on November 8, 1999, submits the following comments.
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. Midvale provides telephone service to Yellow Pine, Warren, Warm Lake, Lakeside, and Midvale, Idaho. Midvale also provides telephone service in Oregon and Arizona. Sawtooth Telephone, Inc. is a wholly owned subsidiary of Midvale Telephone Exchange and provides telephone service to the Stanley, Idaho area.
The Applicants contend benefits will result from the merger. These benefits include cost savings related to records to be kept, cost savings related to regulatory investigations and better access to capital. The cost savings after the merger will no doubt occur but will not be large because records must still be maintained to make cost allocations between the three states and the
federal jurisdiction. There will, however, be one less allocation by eliminating the corporate structure for Sawtooth.
The original reason for separate entities was to maintain records related to rate differentials and a rate freeze when the Stanley exchange was purchased from U S WEST. As noted in the Application, page 2, the time for the rate freeze has expired. New tariff rates will be established in Case Nos. MID-T-99-1 / SAW-T-99-1. Staff has preliminary audit information in those rate cases sufficient to verify that as a result of the merger no subsidies between Midvale and Sawtooth will occur. When all local rates are adjusted to the 125% statewide average threshold, both Midvale and Sawtooth will be eligible to receive payments from the USF. There will be no additional draw on the Idaho Universal Service Fund (USF) as a result of the merger.
There is no evidence that the merger of the two corporations will disadvantage customers as a whole. The accounting cost reduction should actually result in lower USF draws than might
otherwise occur absent the merger. Staff believes the merger is in the public interest. Therefore, Staff recommends the merger be approved.

Dated at Boise, Idaho, this day of November 1999.

________________________
Cheri C. Copsey
Deputy Attorney General
Technical Staff: Terri Carlock

CCC:TC:gdk:i/umisc/comments/midt992_sawt992.ccctc
STAFF COMMENTS 1 NOVEMBER 29, 1999