jointstipulation.doc

CHERI C. COPSEY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, ID 83720-0074
Telephone: [phone]
FAX: [phone]

Street Address for Express Mail:
472 W. Washington Street
Boise, ID 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE JOINT APPLICATION OF MIDVALE TELEPHONE EXCHANGE, INC. AND SAWTOOTH TELEPHONE, INC. FOR AUTHORITY TO INCREASE RATES AND DISBURSEMENTS FROM THE IDAHO USF.

IN THE MATTER OF THE PETITIONS FROM CITIZENS IN WASHINGTON COUNTY REQUESTING EXTENDED AREA SERVICE (EAS) BETWEEN THE EXCHANGES OF MIDVALE TELEPHONE EXCHANGE, INC. AND THE CAMBRIDGE TELEPHONE COMPANY AND COMMUNITIES IN THE TREASURE VALLEY CALLING AREA OF U S WEST.
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CASE NOS. MID-T-99-1
SAW-T-99-1

CASE NO. GNR-T-99-11

STIPULATION
AND SETTLEMENT
AGREEMENT

Pursuant to Procedural Rules 248 and 272 (IDAPA 31.01.01.248, .272), the Idaho Public Utilities Commission Staff, Midvale Telephone Company and Sawtooth Telephone Company (hereinafter referred to as “Midvale”), by an through their respective attorneys of record, enter into this Stipulation and Settlement.
On September 28, 1999, Midvale filed a Joint Application requesting that the Commission authorize a general rate increase and requesting that Midvale’s disbursement from the state Universal Service Fund (USF) be increased to $479,519. In addition to proposing a general rate increase, Midvale proposed to implement several toll-free extended area service (EAS) routes, increase the rates for local services to partially pay for EAS, and bring long-distance access charges to the statewide average. On October 19, 1999, the Commission suspended the rates that are the subject of the Application for a period of thirty (30) days plus five (5) months from the proposed effective date of November 1, 1999, pursuant to Idaho Code § 61-622. Order No. 28179.
On December 10, 1999, Midvale filed revised testimony that substantially changed its calculation of the revenue deficiency and USF request proposing to increase its annual USF draw by $123,128 per year. On January 13, 2000, the Commission continued the suspension for an additional period of sixty (60) days, or until such time as the Commission may issue an Order accepting or rejecting or modifying the Application in this matter. Idaho Code § 61-622. Order No.  28249.
Commission Staff and U S WEST filed direct testimony on April 5, 2000. U S WEST recommended EAS be granted for the Midvale exchange into the entire U S WEST Treasure Valley EAS Region. Staff recommended Midvale’s EAS request to the mini-region be granted but argued EAS for Stanley into Ketchum and Hailey be denied. Staff further argued that EAS to the entire U S WEST Treasure Valley EAS Region should be denied. The mini-region proposed includes Midvale’s Midvale exchange, U S WEST’s Payette and Weiser exchanges, and Cambridge’s Cambridge, Cuprum, Indian Valley and Council exchanges. Midvale also proposes Farmers Mutual Telephone Company’s Fruitland and Nu Acres exchanges be included. However, Farmers is a cooperative and not subject to the Commission’s jurisdiction.
Staff also testified that if no EAS requests are granted Midvale’s USF draw be decreased to $164,830. If EAS for the mini-region is granted, Staff recommended Midvale’s USF draw be increased to $252,582 and increased to $281,687 if EAS for the Stanley exchange into Ketchum and Hailey is also granted.
On April 24, 2000, at the request of the parties, the Commission vacated the technical hearing that had been scheduled to begin April 25, 2000, and vacated the date for filing rebuttal testimony. Order No. 28350. Settlement negotiations ensued. The parties exchanged underlying data and arrived at the following Stipulation and Settlement of some issues in the case.
STIPULATION AND SETTLEMENT
The parties to the Settlement and Stipulation agree that:
There is a community of interest supporting EAS for the mini-region.
EAS for the Midvale exchange should be consistent with the Commission’s decision regarding EAS for the Cambridge exchange in CAM-T-99-02/COU-T-99-02.
The mini-region referred to in this Stipulation includes Midvale’s Midvale exchange, U S WEST’s Payette and Weiser exchanges, and Cambridge’s Cambridge, Cuprum, Indian Valley and Council exchanges. Midvale also proposes Farmers Mutual Telephone Company’s Fruitland and Nu Acres exchanges be included. Midvale should be authorized to include Farmers Mutual Telephone Company’s Fruitland and Nu Acres exchanges provided Farmers agrees.
In those exchanges for which the Commission approves EAS, it is just and reasonable to set the rates for local exchange service at $24.10 per month for residential service and $42.00 per month business service.
In those exchanges for which the Commission does not approve EAS, the Commission is required by Idaho Code § 62-610 to raise rates to the USF threshold rates, currently $21.28 per month for residential service and $39.77 per month business service.
Midvale’s access charges should be reduced to the statewide level as proposed in the Joint Application.
The parties agree to amortize rate case expenses over a 3 year period.
The parties do not agree on the appropriate return on equity. Staff maintains the appropriate return is 11.75% and Midvale urges the Commission adopt a 13% return on equity. If the Commission does not approve EAS for any Midvale exchange, the parties agree that Midvale’s base revenue requirement computed at an 11.75% return on equity would decrease Midvale’s existing Idaho USF draw by $23,148 per year, assuming a two percent (2%) allocation for non-regulated activities, reflecting $2000 for the effects of measured service buy-up and the proposed local service rates and access rates being implemented. If the Commission does not approve EAS for any Midvale exchange and adopts a 13% return on equity, the parties agree this would increase the $23,148 figure above by approximately $3900.
If the Commission approves EAS for the Midvale exchange to the mini-region, as stipulated, the cost for implementing EAS from the Midvale exchange to the mini-region is $186,044 per year which will result in an increase to Midvale’s yearly USF draw.
If the Commission approves EAS for the Midvale exchange to the entire U S WEST Treasure Valley EAS Region, the cost for implementing EAS from the Midvale exchange is an additional $104,937 per year above the cost for providing EAS into the mini-region which will result in an increase to Midvale’s yearly USF draw.
If the Commission approves EAS for the Stanley exchange to U S WEST Hailey and Ketchum exchanges the cost for implementing EAS is $31,709 per year which will result in a corresponding increase to Midvale’s yearly USF draw.
Measured service will be offered and its effect on revenue is assumed to be $2000.
Two percent (2%) allocation for non-regulated activities is reasonable for use in this case.
The signatory parties strongly believe that this Stipulation and Settlement represents a reasonable resolution of issues in this case. As with any general rate case, the signatory parties recognize the complexity of the issues and the amount of effort and resources that would be expended by all parties in litigation if settlement does not occur. The Staff’s investigation and audit reveals that the proposed local service rates, the reduction of access charges, coupled with a decrease in USF payments if no EAS routes are approved and an increase in USF disbursement if EAS routes are approved do not produce excessive earnings. In the event that the Commission does not adopt this Stipulation, the Staff and Midvale each reserve their rights fully litigate the issues encompassed in this Settlement
The signatory parties do not believe that a hearing on this settlement is necessary. However, the parties are ready to provide evidentiary support if necessary at the technical hearing scheduled for May 16, 2000. The parties request the Commission to adopt this Stipulation and Settlement and issue its final order in accordance with its terms.
Dated this _____ day of May, 2000.

________________________________
Cheri C. Copsey
Deputy Attorney General
Attorney for the Commission Staff

________________________________
Conley Ward
GIVENS PURSLEY LLP
Attorneys for Midvale Telephone Company and
Sawtooth Telephone Company

M:\midt991_sawt991_cc-stip
On December 17, 1999, the Commission approved the merger of Midvale and Sawtooth . See Order No. 28233.

Prior to the merger, Sawtooth was not a USF recipient.

STIPULATION AND
SETTLEMENT AGREEMENT 3