20020730Qwest Response.pdf

HEGEIVED
FilED
Mary S. Hobson (ISB #2142)
Stoel Rives LLP
101 South Capitol Boulevard - Suite 1900
Boise, ID 83702
Tele: [phone]
Fax: [phone]
23HZ JUL 30 PH~: 31
, L.
unliT IES COI'lliISSlGN
Attorney for Qwest Corporation
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
INVESTIGATION BY THE IDAHO
PUBLIC UTILITIES COMMISSION
TO DETERMINE A POLE
ATTACHMENT RATE FORMULA
PURSUANT TO IDAHO CODE ~61-538
Case No. GNR-02-
QWEST RESPONSE TO IDAHO PUBLIC
UTILITIES COMMISSION REQUEST
Qwest Corporation (Qwest) by and through its attorneys of record provide the
following responses to the questions posed in the July 15, 2002, letter from the Deputy
Attorney General, Weldon Stutzman.
Please provide, expressed as a formula, your proposed methodology for
calculating cable television pole attachment rates. Provide a narrative
discussion of the legal, policy or economic justifications for your proposed
formula.
Response:See page two of Attachment 1 for Qwest's proposed fonnula for
calculating cable television pole attachment rates. This fonnula, which is similar to the
Telecom Fonnula adopted by the FCC for use in calculating maximum pole attachment
rates for telecommunications attachers, provides for proper cost recovery, based on a fully
allocated cost methodology, ofthe following cost elements associated with the provision of
poles for use by utilities: pole depreciation and cost of capital at state-prescribed rates
pole maintenance expenses, and an appropriate allocation of corporate administrative
expenses and taxes.
Qwest's proposal creates a single cost detennination fonnula for all attachments
occupying a standard I-foot of space, regardless of use, with the only differentiation being
QWEST RESPONSE TO IDAHO PUBLIC UTILITIES COMMISSION REQUEST - Page 1
Boise-144647.20029164-00033
the location of the pole in an urban (i., greater than 50 000 population) versus non-urban
(i., less than 50 000 population) location. The fonnula does not provide for any phase-
period between existing rates and rates calculated under the proposed fonnula. Thus, all
rates as calculated would be effective immediately.
The proposed cost fonnula consists of the following three components: Amount
space per pole per attachment (both usable and non-usable pole space), times gross cost of
a bare pole, times total carrying charge per dollar of gross pole investment. Each of these
three components is discussed briefly below:
Amount of space per pole per attachment -- The FCC has established the
following rebuttable presumptions regarding pole space that Qwest, although reserving the
right to do so in the future, is not challenging at this time:
Pole space occupied per attachment = 1 foot
Total pole height = 37.5 feet
Usable pole space = 13.5 feet (36% of total pole)
Unusable pole space = 24 feet (64% or approximately 2/3 of total
pole)
Number of attaching entities in urban area = 5
Number of attaching entities in non-urban area = 3
In keeping with the FCC's detennination of cost responsibility, each pole attacher
will pay for the amount of usable space it consumes (i., 1 foot per attachment) and will
share equally in the payment for the unusable space, based on the average number of
attaching entities (i., five in urban and three in non-urban locations). Thus, using the
rebuttable presumptions shown above, each attachment is responsible for 11.2% of the
total pole space in urban areas and 16.9% in non-urban areas. This calculation can be seen
on Attachment 1 , page 2, lines lOB and lIB.
Gross cost of a bare pole -- Because pole removal costs typically exceed gross
salvage proceeds by a wide margin, negative net salvage values and, consequently,
negative net investment may occur late in a pole s useful life. Because the fonnu1a
calculation involves the multiplication of three factors, if one of the factors is negative (i.
negative net investment), then a negative rate would result. Therefore, the proper pole cost
amount to use in this fonnula is the gross cost of a pole (reduced to a level of95% for
QWEST RESPONSE TO IDAHO PUBLIC UTILITIES COMMISSION REQUEST - Page 2
Boise-I44647.20029164-00033
telephone companies and 85% for electric utilities to eliminate investment in cross arms
and other non-pole investments unique to the company owning the pole that may be
recorded in the pole account). This component is calculated as: (Gross Pole investment/
Total number of poles) times .95 (telephone companies) and can be seen on Attachment 1
page 2, lines 10C and 11 C.
Total carrying charge per dollar of gross pole investment -- Carrying charges are
the costs incurred by the utility in owning and maintaining poles. The carrying charges
include the utility s administrative, maintenance, depreciation, and tax expenses (expressed
as an amount per dollar of gross investment), as well as a return on the net pole investment.
If a utility s net pole investment is negative, there would be no return component in the
total carrying charge amount.
In addition to the pole maintenance expenses (reduced by any pole rental payments
included in the pole maintenance expense account), which can be specifically identified
from the companies' books of account , and depreciation expense, which can be calculated
using state-prescribed pole depreciation rates, it is also appropriate to allocate a portion of
the following general and administrative costs which indirectly support the administration
of poles:
Network and General Support Expenses (Accounts 6110 and 6120)
- These accounts include the costs of repairing, maintaining, and
operating the motor vehicle fleet, land and buildings, office
equipment, and computers (including the computer systems used for
tracking pole inventory records).
Plant Operations Administration Expense (Account 6534) - This
account includes costs incurred in the general administration of plant
operations, including the development of methods and procedures
for plant operations, the preparation of training for plant technicians
and the coordination of safety programs. These costs are incurred
for the benefit of all plant facilities and operations, including poles.
Engineering Expense (Account 6535) - This account includes costs
incurred in the general engineering of the telecommunications plant
that are not directly chargeable to an undertaking or project. This
includes developing input to the fundamental planning process
perfonning preliminary work or advance planning in connection
with potential undertakings, and perfonning special studies of an
QWEST RESPONSE TO IDAHO PUBLIC UTILITIES COMMISSION REQUEST - Page 3
Boise-144647,20029164-00033
engineering nature. Again, all plant facilities, including poles
benefit from the incurrence of these engineering costs.
General and Administrative Expense (Accounts 6710 and 6720)-
These accounts consist of the following types of general corporate
overhead activities: executive and planning, accounting and
finance, external relations, human resources, infonnation
management, legal, procurement, research and development, and
other general and administrative expenses. These functions benefit
all phases ofQwest's operations, including pole rentals.
For each of the following elements, please provide a worksheet showing your
proposed method for calculating and including the element in a pole
attachment formula. If you believe an element should not be included,
indicate that as your response.
Net Investment Per Bare Pole (include the data source and
methodology for determining number of poles in the utility's inventory)
Response: See Attachment 1 , page 2, lines 10C and 11 C. As reflected in this
calculation and discussed in Response 1 , above, Qwest believes that the appropriate
investment number to use is gross (not net) investment per bare pole.
Administrative Carrying Charge
Response: See Attachment 1 , page 1 , line 5G.
Maintenance Carrying Charge
Response: See Attachment 1 , page 1 , line 4E.
Depreciation Carrying Charge
Response: See Attachment 1 , page 1 , line 3A.
Tax Carrying Charge
Response: See Attachment 1 , page 1 , line 6c.
Return on Investment
Response:See Attachment 1 , page 1 , line 7D.
Total Annual Cost per Distribution Pole
See Attachment 1 , page 2, lines 10D (for urban area) and lID (forResponse:
non-urban area)
If your proposed formula requires a determination of how much space on a
pole should be assigned to cable television attachments, describe your
QWEST RESPONSE TO IDAHO PUBLIC UTILITIES COMMISSION REQUEST - Page 4
Boise-144647,20029164-00033
proposed methodology for determining space assigned to cable television
attachments per pole. Include references to data sources necessary to make
the determination.
Response:Qwest recommends use of the FCC's rebuttable presumptions of one
foot per attachment for usable space and either 3.2 feet of unusable space in urban areas or
5.333 feet of unusable space in non-urban areas. (See Attachment 1 , lines 9A, lOA, and
11 A)
If your proposed formula requires a determination of what space on a pole
should be considered Usable Space, describe your proposed methodology for
determining Usable Space. Include references to data sources necessary to
make the determination.
Response:Qwest recommends use of the FCC's rebuttable presumption of 13.
feet. (See Attachment 1 , page 1 , line 9B)
Describe your proposed methodology for determining the total number of
cable television attachments located on the utility's poles.
Response: Qwest recommends use of the FCC's rebuttable presumptions of
five total attaching entities in an urban location (i., 50 000 or higher population) and
three total attaching entities in a non-urban location (i., less than 50 000 population).
(See Attachment 1, page 1 , lines 9F and 9G)
If your proposed formula requires a determination of average pole height,
describe your proposed methodology for determining average pole height.
Include references to data sources necessary to make the determination.
Response: Qwest recommends use of the FCC's rebuttable presumption of37.5
feet. (See Attachment 1 , page 1 , line 9D)
If you contend a pole attachment formula should include rate elements
additional to those identified above, please provide a worksheet setting forth
your proposed method for calculating Additional Rate Elements. Include
references to data sources necessary to make the calculation(s). Provide a
narrative discussion of the economic, policy, legal or other justification for any
additional rate elements.
Response: See Response 1 for a general description and Attachment 1 for a
listing of all rate elements that Qwest contends should be used in the calculation of pole
attachment rates.
QWEST RESPONSE TO IDAHO PUBLIC UTILITIES COMMISSION REQUEST - Page 5
Boise-144647,20029164-00033
RESPECTFULLY SUBMITTED this !;O-ay of July 2002.
~~~~~
Attorneys for Qwest Corporation
QWEST RESPONSE TO IDAHO PUBLIC UTILITIES COMMISSION REQUEST - Page 6
Boise-144647.20029164-00033
Attachment 1
aWEST PROPOSED FORMULA FOR DETERMINING
MAXIMUM RATE FOR USE OF UTILITY COMPANY POLES
State of Idaho
General Calculations:
1. POLE INVESTMENT
A, Gross Pole I nvestment (Account 2411 - Poles)
B. Accumulated Depreciation (Account 3124.11 - Poles)
C. Accumulated Deferred Income Taxes (Account 4340 - Poles) (see Note 1)
D. Net Pole Investment 1D = 1A-1B-
2. TOTAL PLANT INVESTMENT
A. Gross Plant Investment (Account 2001)
B. Accumulated Depreciation (Accounts 3100 3400, and 3500) (see Note 2)
C. Accumulated Deferred Income Taxes (Accounts 4100 and 4340)
D. Net Plant Investment 2D = 2A-2B-
3. DEPRECIATION ELEMENT
A. Depreciation Rate for Gross Pole Investment
4. MAINTENANCE ELEMENT
A. Maintenance Expense - Poles (Account 6411)
B. Rental Expense - Poles (Account 6411 - EXTCs cpa, CPU, CP7, 59A)
C. Net Maintenance Expense - Poles 4C = 4A-
D. Gross Pole Investment (Line 1A)
E. Maintenance Element 4E = 4C/4D
5. ADMINISTRATIVE ELEMENT
A. Total Network and General Support Expense (Accounts 6110 and 6120)
B. Total Plant Operations Administration Expense (Account 6534)
C. Total Engineering Expense (Account 6535)
D. Total General and Administrative Expense (Accounts 6710 and 6720)
E. Total Administrative Expenses 5E = 5A+5B+5C+5D
F. Gross Plant Investment (Line 2A)
G. Administrative Element 5G = 5E/5F
6. TAXES ELEMENT
A. Total Operating Taxes (Account 7200)
B. Gross Plant Investment (Line 2A)
C. Taxes Element 6C = 6A16B
7. RETURN ELEMENT
A. Authorized Rate of Return
B. Net Pole Investment (Line 1 D)
C. Gross Pole Investment (Line 1A)
D. Return Element 7D = (7A*7B)/7C
8. CARRYING CHARGE RATE
A. Sum of Carrying Charge Rate Elements 8A = 3A+4E+5G+6C+7D
9. OTHER INFORMATION (see Note 3)
A, Pole Space Occupied per Attachment
B. Usable Pole Space
C. Unusable Pole Space
D. Pole Height 9D = 9B+9C
E. Bare Pole Factor
F. Number of Attaching Entities - Urbanized
G. Number of Attaching Entities - Non-Urbanized
H. Total Number of Poles
Pole Attachment Formula
Formulas.xls
ARMIS 43-, Row 2411(b)
MR Books supporting ARMIS 43-, Row 03900)
awest Tax Dept.
Calculated Value
ARMIS 43-, Row 2001 (b)
ARMIS 43-, Rows 3100(b)+3400(b)+3500(b)
ARMIS 43-, Rows 4100(b)+4340(b)
Calculated Value
State Prescribed Rate
ARMIS 43-, Row 6411(b)
Amount per MR Company Books
Calculated Value
Calculated Value
ARMIS 43-, Rows 6110(b)+6120(b)
ARMIS 43-, Row 6534(b)
ARMIS 43-, Row 6535(b)
ARMIS 43-, Rows 6710(b)+6720(b)
Calculated Value
Calculated Value
ARMIS 43-, Row 7200(b)
Calculated Value
Rate of Return, per latest State Cost Docket
Calculated Value (If negative value, use 0)
Calculated Value
1 foot (FCC rebuttable presumption)
13.5 feet (FCC rebuttable presumption)
24 feet (FCC rebuttable presumption)
37.5 feet (FCC rebuttable presumption)
95 (FCC presumption)
5 (FCC rebuttable presumption)
3 (FCC rebuttable presumption)
ARMIS 43-, Table LA, column (v)
Page 1
Attachment 1
aWEST PROPOSED FORMULA FOR DETERMINING
MAXIMUM RATE FOR USE OF UTILITY COMPANY POLES
State of Idaho
Pole Attachment Formula:
MAXIMUM RATE PER POLE = mSPACE OCCUPIED + (213 x (UNUSABLE SPACE!
NO. OF ATTACHING ENTITIES))) / POLE HEIGHT) x (GROSS POLE INVESTMENT!
TOTAL NUMBER OF POLES) x 0.95 BARE POLE FACTOR x CARRYING CHARGE RATE
10. MAXIMUM YEARLY RATE PER POLE PER ATTACHMENT CALCULATION - URBANIZED (50 000 or higher population)
A. Unusable Space Portion = 2/3 x (Unusable Space/No. of Attaching Entities)
10A = 2/3*(9C/9F)
B. Space Factor = (Space Occupied + Unusable Space Portion)/Pole Height
10B = (9A+10A)/9D
C, Gross Cost of a Bare Pole = (Gross Pole InvestmentITotal No. of Poles) x 0.
10C = (1A19H)*
D. Maximum Yearly Rate per Pole per Attachment 10D = 10B*10C*
2 (FCC rebuttable presumption)
112 (FCC rebuttable presumption)
Calculated Value
Calculated Value
11. MAXIMUM YEARLY RATE PER POLE PER ATTACHMENT CALCULATION - NON-URBANIZED (less than 50 000 population)
A. Unusable Space Portion = 2/3 x (Unusable Space/No. of Attaching Entities)
11A = 2/3*(9C/9G)
B, Space Factor = (Space Occupied + Unusable Space Portion)/Pole Height
11 B = (9A+11A)/9D
C, Gross Cost of a Bare Pole = (Gross Pole InvestmentITotal No. of Poles) x 0.
11C = (1A19H)*
D. Maximum Yearly Rate per Pole per Attachment 11D = 11B*11C*
333 (FCC rebuttable presumption)
169 (FCC rebuttable presumption)
Calculated Value
Calculated Value
Notes:
1. Accumulated Deferred Income Taxes consist of Accounts 4100 and 4340. However, Qwest does not include Property
related (including Pole) Deferred taxes in Account 4100; therefore only that portion of Account 4340 specific to poles
would be used in this calculation.
2. Investment summary account 2001 (shown on Line 2A) also includes Accounts 2680 (Amortizable Tangible Asssets)
and 2690 (Intangibles). Thus, the related Accumulated Amortization Accounts to use in the calculation of Net Plant
Investment (shown on Line 2D) would be Accounts 3100 3400, and 3500.
3. FCC rebuttable presumption values used for this calculation are per FCC Docket 01-170 (CS Dockets No. 97-98 and
97-151), Consolidated Partial Order on Reconsideration , Released May 25 2001 , which deals with Pole Attachment
Rates.
Pole Attachment Formula
Formulas.xls Page 2