USWS965v19.docx

SUSAN HAMLIN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
472 WEST WASHINGTON STREET
PO BOX 83720
BOISE,  IDAHO  83720-0074
[phone]
Attorney for the Commission Staff
BEFORE  THE  IDAHO  PUBLIC  UTILITIES  COMMISSION

IN THE MATTER OF THE APPLICATION)
OF U S WEST COMMUNICATIONS, INC.)CASE  NO.  USW-S-96-5
FOR AUTHORITY TO INCREASE ITS)
RATES AND CHARGES FOR)STAFF'S PARTIAL RESPONSE   
REGULATED TITLE 61 SERVICES.)TO THE FOURTH PRODUCTION
)REQUEST OF U S WEST
________________________________)COMMUNICATIONS, INC.
The Staff of the Idaho Public Utilities Commission, by and through its attorney of record, Susan Hamlin, Deputy Attorney General, hereby responds to U S WEST Communications, Inc.’s Fourth Request for Production to the Idaho Public Utilities Commission Staff dated February 26, 1997.
REQUEST NO. 157:Wayne Hart
A.Mr. Hart indicates on page 2 of his rebuttal testimony that complaints from 1/4 of 1% of U S WEST's customers is of concern to the IPUC.  What level of complaints expressed as a percentage of access lines would be acceptable to the Commission Staff and which would eliminate Staff's proposed reduction of the Company's rate of return?
B.Provide all reasons which support your selection of a particular level of complaints.
RESPONSE NO. 157:Wayne Hart
A.Staff does not believe a single measurement, such as total number of complaints, is an appropriate indicator of the Company’s service quality.
REQUEST NO. 158:Wayne Hart
Please provide all documents, work papers and analysis which support Mr. Hart's conclusion on pages 4 and 5 of his rebuttal testimony that prior to 1992 customers called the Commission "if their service has been delayed by a couple of days" and that "Now, many U S WEST customers do not contact the Commission until their orders have been delayed for weeks and sometimes months."
RESPONSE NO. 158:Wayne Hart
Mr. Hart’s conclusion was based upon the oral comments expressed to him by customers of U S WEST in the course of his investigations of their delayed service complaints, his impression after reading the narratives of all held order complaints received by the Commission by other investigators in 1995 and 1996, and comments made to him by other investigators regarding this issue.  Comments regarding the length of time an order has been held prior to a customer contacting the Commission are sometimes recorded in the narrative portion of the investigation records, copies of which have been made available to the Parties in this case.  (See Staff’s response to U S WEST’s Second Production Request No. 6.)
REQUEST NO. 159:Wayne Hart
Please provide all documents, work papers and all evidence relied upon to reach the conclusion on page 5 of Mr. Hart's rebuttal testimony that "the net impact of all the publicity has been a reduction in the number of calls the Commission might otherwise have received."
RESPONSE NO. 159:Wayne Hart
Mr. Hart’s conclusion was based upon the oral comments expressed to him by customers of U S WEST in the course of his investigations of their complaints, and comments made to him by other investigators regarding this issue.  A number of customers indicated to Mr. Hart that they had initially delayed calling the Commission because they were aware of the problems the Company was experiencing and only called because the Company had missed another appointment, delayed the installation a second time, or had done something which caused the customer to believe their circumstances were unusual enough to merit calling the Commission.  Such comments are sometimes recorded in the narrative portion of the investigation records, copies of which have been made available to the Parties in this case.  (See Staff’s response to
U S WEST’s Second Production Request No. 6.)
REQUEST NO. 160:Wayne Hart
Provide work papers to support Mr. Hart's calculation on page 8 of his rebuttal testimony at line 6 where he presents a score of 82 for the 1996 annual average from the settlement matrix found in USW-S-96-4.
RESPONSE NO. 160:Wayne Hart
The workpapers to support this calculation were provided to all parties with the rebuttal testimony of Wayne Hart.
REQUEST NO. 161:Wayne Hart
A.Mr. Hart's rebuttal testimony on page 14 supports a "review" of
U S WEST's rate of return should the Company meet the ROC inspired standards for a year.  What procedure would Staff support to accomplish this review?
B.Under Staff's proposal how would a change in the rate of return for
U S WEST operations be implemented once ROC standards have been met?
C.How long would Staff estimate the period between completion of Staff's one year of meeting ROC standards and an effective rate increase under Staff's procedure?
RESPONSE NO. 161:Wayne Hart
A.I recommend that the order in this case specifically identify all of the revenue and rate structure information that the Company would use in preparing tariffs with and without the rate of return adjustment.  Monthly reporting of the information required for verifying compliance would begin as soon as the data was available, in order that Staff and the Company could identify and resolve any differences early in the process.
When the Company believes that it has met the criteria required for the review of this adjustment, it would petition the Commission for permission to implement the tariff without the rate of return adjustment, and provide both the evidence that the criteria had been met, and the revised tariffs.  The Commission could process the request using the Modified Procedure (Rule 23 of the Commission's Rules of Practice and Procedure).
Staff would limit their review to the issues of whether the Company had met the criteria, and whether the Tariff prepared by the Company was in compliance with the original Order.  Assuming that any differences regarding the data to be used to verify compliance would be resolved well in advance of the submission of a petition by the Company, and that no requests for a hearing are received under modified procedure, Staff expects that matter could be presented to the Commission for action within 30 days of the date the Company submits the petition.
REQUEST NO. 162:Wayne Hart
Mr. Hart's quotation of U S WEST's response to Staff Production Request No. 445 omitted the last sentence of that response as follows:  "Nevertheless, it remains true that, on average, cost of telephone service is higher for rural areas where greater distance from the central office and lower density are present."
A.If Mr. Hart disagrees with this statement please provide each and every fact, document, work paper or analysis that form the basis for his disagreement?
B.What studies or other evidence would support his conclusion that rural customers are not more expensive to serve, on average?
RESPONSE NO. 162:Wayne Hart
A.Mr. Hart does not disagree with the statement.
REQUEST NO. 163:Eastlake p. 2 and Lansing
A.Is it Mr. Eastlake's position that the entire reduction in revenue requirement from U S WEST's direct case to its rebuttal case attributable to calculation of the impact of charges due to EAS implementation including "rate group consolidation"?
B.If your response is negative, please provide the actual numbers associated with U S WEST's calculation which you understand to be associated with the implementation of the EAS order.
C.If your response to part A. is negative, please explain why Mr. Eastlake did not present the actual number associated with EAS impacts in his testimony.
RESPONSE NO. 163:Eastlake p. 2 and Lansing
A.No.
B.The actual numbers associated with EAS implementation are found in the attachment, which includes Wright’s adjustments #27 and #28 as well as Staff adjustments to them as found in Exhibit No. 101, page 10.
C.See attachments referred to in B. and Eastlake, Rebuttal, page 5, lines 7-25.
REQUEST NO. 164:Eastlake, p. 2
A.Does Staff agree that part of the so-called interim rate increase was actually attributable to the revenue neutral redistribution of the monthly rural zone charges?
B.If your response to part "A" above is affirmative, please identify the amount of revenue associated with this adjustment and the portion of the so-called interim rate increase which is attributable to this charge.
C.How does Staff propose the revenue requirement associated with the elimination and redistribution of the rural zone charge be handled in the current case?
D.To the extent Staff believes its calculations of the Company's revenue requirement account for the Staff/Company stipulated agreement to eliminate the rural zone charge and redistribute the charge among customers included in the EAS regions, please identify precisely where in Staff's exhibits and work papers this has been done.
E.To the extent that Staff believes it is not necessary to include the Staff/Company stipulated agreement regarding rural zone charges in its calculation of the Company's revenue requirement, please provide all data, evidence and analysis which support that conclusion.
RESPONSE NO. 164:Eastlake, p. 2
A.Yes.
B.I believe the amount is $2,374,550, which is spread over customers to arrive at a figure of $.76 per month.
C.There should be no specific adjustment for rural zone charge elimination.  New rates set in this case will be set based upon the overall revenue requirement.
D.See answer to C. above.
E.Order No. 26672, Order No. 26728 and U S WEST witness James Wozniak’s rebuttal testimony and transcript in Case No. USW-S-96-4.  My rebuttal testimony at page 3 cites also Order No. 26728 and quotes from U S WEST witness Wozniak from both his rebuttal testimony and the transcript in USW-S-96-4 as further evidence.
REQUEST NO. 165:Eastlake p. 2 and Lansing
A.In light of Mr. Eastlake's characterization that U S WEST's calculation of its reduced revenue requirement is "misleading", is it Staff's position that the rate increase associated with the implementation of EAS is not a "known and measurable change" which is required to be made by the Company for ratemaking purposes?
B.If your response is negative, explain why the increased revenue need not be included for rate-making.
C.If Staff believes the rate increase is a known and measurable change, please explain why this revenue was not included in Staff's calculation of the Company's revenue requirement.
RESPONSE NO. 165:Eastlake p. 2 and Lansing
A.Staff believes there will be a rate change attributable to implementation of EAS, as shown in Exhibit No. 101, page 10.
B.See A. above.
C. See A. above.
REQUEST NO. 166:Eastlake p. 4 and Baldwin
Given that Staff proposes use of Revenue Sharing funds to purchase plant assets which will be used to implement EAS, and further given Ms. Baldwin's position that use of Revenue Sharing funds for prior network improvement projects created a "quid pro quo" such that U S WEST should be prohibited from including other plant in Title 61 rate base, please identify all adjustments to the Company rate base that Staff would advocate due to use of the $2.2 million as referenced on  line 12, p. 4 of Mr. Eastlake's testimony.
RESPONSE NO. 166:Eastlake p. 4 and Baldwin
The plant would be added to Title 61 plant  at its current cost and offset with an adjustment to accumulated depreciation, so the net addition to rate base would be zero.
REQUEST NO. 167:Eastlake, p. 4, ln. 24
A.Please explain what is meant for the phrase "subject to audit" in the context of the cited testimony.
B.Describe all steps Staff has taken to audit Ms. Wright's EAS adjustment calculations.
C.Does Staff contend it was not permitted to audit Ms. Wright's EAS adjustment?
RESPONSE NO. 167:Eastlake, p. 4, ln. 24
A.The “subject to audit” phrase should be deleted at line 24 and added at line 13 of the same page.  It was meant only to refer to the $3.707 million total  estimated for implementation costs of EAS (Wright’s adjustment #28).  In the correct context, it means simply that Staff wishes to restrict funding of implementation costs to the amount actually expended, rather than the engineering estimate.
B.See answer to A. above.
C.See answer to A. above.
REQUEST NO. 168:Eastlake p. 5, lines 14-19, and 22-25/Baldwin
A.What "intrastate level" (l. 16) did Staff use to begin its calculation?
B.Please identify and explain the specific Staff Title 61 allocation factors (p. 5, l.13) which you apply to split your intrastate amount between Title 61 and Title 62.
C.Show all calculations for EAS costs used for determining the Staff EAS Title 61 adjustment related to investment.
D.Please explain why Staff felt it necessary to apply "allocation factors" to plant previously identified to as Title 62 and re-assigned to Title 61 as the result of a Commission order changing the character (from "toll" to "local") of the use of facilities.  As part of this response identify each allocator or adjustment which applies in this context.
E.Provide all work papers that show the Staff's recommended level of investment expense for the EAS adjustment.
RESPONSE NO. 168:Eastlake p. 5, lines 14-19, and 22-25/Baldwin
A.The same level referred to as Idaho-South Intrastate Title 61 on Wright’s Adjustment #28, Column A.
B.The specific Staff allocation factors are found on Baldwin, Rebuttal Workpaper #4, as noted on Lansing, Rebuttal, Exhibit No. 101, page 10.
C.The requisite information is provided on Lansing, Rebuttal, Exhibit No. 101,
page 10.
D.Answer is found at C. above.
E.Answer is found at C. above.
REQUEST NO. 169:Eastlake, p. 5 and Baldwin
A.What "intrastate level" of expense did Staff use in connection with its calculation of the appropriate operating expense associated with the EAS implementation?
B.Please identify and explain the specific allocation factors are used to allocate Staff's calculation of the intrastate expense between Title 61 and Title 62.
C.Show all calculations for EAS costs used for determining the Staff Title 61 adjustment related to operating expense.
D.Provide all work papers that show the Staff's recommended level of operating expense associated with the EAS adjustment.
RESPONSE NO. 169:Eastlake, p. 5 and Baldwin
A.Answers found in Answer No. 168 above.
REQUEST NO. 170:Baldwin, Eastlake and Lansing
Please explain why the Commission's order creating the EAS regions did not create an opportunity for Staff to "directly assign" investment and expense to Title 61 and away from Title 62.
RESPONSE NO. 170:Baldwin, Eastlake and Lansing
The plant in question was not used wholly for Title 62 services before and is not now providing wholly Title 61 services, so some allocation (rather than direct assignment) is proper.
REQUEST NO. 171:Hart Revised Schedule 3, Ex. No. 120
A.Are "out of service" investigated complaints contained on this exhibit?
B.If your answer is affirmative, please identify the category in which they are included.
C.If your answer to part "A" is negative, please explain why they are not included.
RESPONSE NO. 171:Hart Revised Schedule 3, Ex. No. 120
A.Yes.  Out of service investigated complaints are included in the service quality category.
REQUEST NO. 172:Hart Revised Schedule 3, Ex. No. 120
A.Are "Misc. svc. quality" investigated complaints contained on this exhibit?
B.If your answer is affirmative, please identify the category in which they are included.
C.If your answer to part "A" is negative, please explain why they are not included.
RESPONSE NO. 172:Hart Revised Schedule 3, Ex. No. 120
A.Yes.  Misc. svc. quality investigated complaints are included in the service quality category.
REQUEST NO. 173:Hart Revised Schedule 3, Ex. No. 120
A.Please explain why the Revised Schedule does not depict "Caller ID" investigations for 1995.
B.Why are "Caller ID" investigations included in a discussion of service quality in connection with setting Title 61 rates?
C.What other Title 62 products or services are tracked directly by Staff?
D.For each year since 1990 provide by product the level of investigations Staff has conducted relating to Title 62 services (including but not limited to toll and Caller ID).
RESPONSE NO. 173:Hart Revised Schedule 3, Ex. No. 120
A.The revised schedule does depict “Caller ID” investigations for 1995, but the numbers are so small that they are not distinguishable on the exhibit.
B.As indicated in Staff’s Response to U S WEST’s First Production Request No. 13, and in Staff’s Response to U S WEST’s Second Production Request No. 26, Staff’s analysis of inquiries and complaints does not differentiate between Title 61 and Title 62 products and services.  The Commission has jurisdiction over complaints for both Title 61 and 62 services.  In this specific instance, although the product that is the subject of the complaint is Caller ID, a Title 62 product,  most of the complaints involve U S WEST’s billing for this product, which is a Title 61 service.  Under the partial deregulation that U S WEST has elected, this mixing of Title 61 and Title 62 issues would be common for those complaints involving Title 62 products or services.  As indicated in the surrebuttal testimony of Staff witness Cooper, most complaints involve more than one subject.  Most of the complaints that are identified as involving the four codes that deal primarily with Title 62 issues would also involve Title 61 issues.
C.Disputed Toll - 0607
Payphone Operations/Labeling - 0802
Caller ID- 0804
Deregulated equipment- 0805
D.Information regarding the number of complaints for all issues was provided in Staff’s Response to U S WEST’s Second Production Request No. 6.
REQUEST NO. 174:Hart p. 9, ln. 10
A.Please identify the "Staff Audit report" which you claim "identified concerns with other [BSM] measurements."
B.Provide a copy of the referenced report.
RESPONSE NO. 174:Hart p. 9, ln. 10
A.The Staff Audit report includes the findings of the customer service performance audit of U S WEST conducted by Staff in Case No. USW-S-94-5.
B.The summary of that report was included as Staff Exhibit No. 123.  A copy of the full report is attached.  It was never submitted due to withdrawal of U S WEST from the agreement and the eventual closure of the case.
REQUEST NO. 175:Hart p. 12, ll. 7-13
Please provide copies of all Commission decisions in which the Commission relied on evidence of past poor service performance to reduce a utility's rate of return when presented with evidence that current service performance had improved.
RESPONSE NO. 175:Hart p. 12, ll. 7-13
A.Although Staff believes the question does not accurately reflect Mr. Hart's testimony, Staff is not aware of any instance where a utility presented evidence of service improvements as an argument against the Commission decision to recognize poor service performance in the utility’s rate of return.
REQUEST NO. 176:Hart p. 20
A.Is it Staff's position that the Commission exercised jurisdiction over 900/976 toll blocking over the objection of the Company?
B.Please describe the origin of Ex. No. 126 and Staff's involvement in its creation.
RESPONSE NO. 176:Hart p. 20
A.No.  Staff is not aware of any objections of the Company to the Commission’s jurisdiction over 900/976 toll blocking.
B.Exhibit No. 126 was provided by U S WEST as an attachment to the Notice of Election To Be Subject To The Provisions Of The Telecommunications Act of 1988 submitted by U S WEST on March 1, 1989.
REQUEST NO. 177:Hart p. 7
In reference to your estimate of U S WEST performance under the matrix developed by Staff and the Company in Case No. USW-S-96-4, please provide the following:
A.What achievement level and score did you use for out-of-service for more than 24 hours?
B.Provide all documents, work papers and other evidence upon which you rely for establishing the achievement level used in the calculation.
C.Did this calculation achievement level and score exclude "acts of God" which would permit the Company to avoid providing the out-of-service credit?
RESPONSE NO. 177:Hart p. 7
A.The information was provided in the worksheet provided in the workpapers attached to the surrebuttal testimony of Mr. Hart.
B.The information was provided in the workpapers attached to the surrebuttal testimony of Mr. Hart.
C.In accordance with the procedures identified on pages 6 and 7 of the testimony of Staff witness Cusick filed in Case No USW-S-95-4, Mr. Hart used the Out of Service results identified by the Company as Measurement 1, which does not filter out those instances which are not the Company’s fault.
REQUEST NO. 178:Hart
A.What achievement level and score was used for the percentage of provisioning appointments kept in your December 1996 calculation?
B.Is the achievement level used consistent with data on revised Schedule 1 to Ex. No. 122?
C.Does your calculation average business and residence scores?
RESPONSE NO. 178:Hart p. 7
A.The information was provided in the worksheet provided in the workpapers attached to the surrebuttal testimony of Mr. Hart.
B.Yes.
C.The scores used by Mr. Hart are identified in the workpapers submitted with his surrebuttal testimony.  Mr. Hart used a weighted average, with the residential score accorded a weight of 0.75 and the business score accorded a weight of 0.25.
REQUEST NO. 179:
A.How many complaints has the IPUC received during 1996 and 1997 regarding U S WEST Communications' new bill format?
RESPONSE NO. 179:Carol Cooper
A.See Staff response No. 45 to the Second Production Request of U S WEST.
REQUEST NO. 180:
Does the IPUC Staff believe that U S WEST is in violation of any Commission rule/rules regarding availability of billing rights information on bills?  If so, please cite rule.
RESPONSE NO. 180:Carol Cooper
No.
REQUEST NO. 181:Carol Cooper, p. 4, ln. 11
On page 4 line 11, Ms. Cooper discusses additional "leverage" which LECs, which act as billing agents for toll providers, have over customers due to their ability to "control access to local service."  How is leverage exercised by such LECs if Commission rules forbid disconnection of local service for nonpayment of toll charges?
RESPONSE NO. 181:Carol Cooper, p. 4, ln. 11
Even though Commission rules forbid disconnection of local service for nonpayment of toll charges, the customers do not always know the rules or how they apply to their particular situation.  The leverage Ms. Cooper discusses in her testimony is meant to describe the perception the customer has at the time they are threatened with disconnection.  They may not realize there is a distinction between toll charges and basic charges for purposes of termination of service, and the threat of losing their phone completely is implied.
REQUEST NO. 182:
Third parties can also bill toll on behalf of interexchange carriers, just as U S WEST does.
A.Are these third parties are subject to the Commission's twelve month average toll bill deposit calculation?  Please cite the rule applicable to these third parties.
B.Would the ability to use a different approach to toll deposit calculation constitute a competitive advantage for third parties?  Explain why or why not.
RESPONSE NO. 182:Carol Cooper
A.No.  The Commission has no rules relating to the calculation of deposit amounts explicitly for billing aggregators or credit card companies who directly bill customers.
B.A third party who chose to collect no deposit or a lower deposit than U S WEST could have a competitive advantage.  However, U S WEST also has the ability under PUC rules to forgo collection of deposits.
REQUEST NO. 183:
U S WEST prints a customer's service address (not post office address) in its directories which has never included suite numbers, apartment numbers or post office boxes without additional charge.  Please provide any Commission order, rule or directive that mandates such information is to be included in LEC directories associated with a customer's address.
RESPONSE NO. 183:Carol Cooper
IDAPA 31.41.01601
REQUEST NO. 184:
A.How many complaints has the Commission received regarding inclusion of apartment numbers, suite numbers or post office boxes in U S WEST directories in 1995, 1996 and 1997?
B.How many of these complaints came from Title 61 customers?
RESPONSE NO. 184:Carol Cooper
A.Staff has not identified by a specific reason code complaints from customers specifically complaining about inclusion of apartment numbers, suite numbers or post office boxes in the U S WEST directories.  I have scanned 1995 and 1997 complaints and did not identify any additional complaints for those years.  See Staff response to the Second Production Request of U S WEST No. 43.  The one complaint identified under section B should have stated the year as 1996, not 1995.
B.The one complaint in 1996 is a Title 61 customer.
REQUEST NO. 185:
Why does Staff believe that existing customers who become toll restricted due to non-payment and choose to suspend optional services (a service option available today) should not have to pay one-time charges associated with the service reconnection?  Explain.
RESPONSE NO. 185:Carol Cooper
The one-time charges have already been paid by this customer.  U S WEST routinely waives non-recurring charges on promotional offerings to allow customers to try new services. The customers would have some incentive to catch up on their bill in order to get the optional services back that they once enjoyed.  This would also give U S WEST an opportunity to establish a good rapport with customers who try to help themselves.  When Commission Staff offers the suspension of optional services as a way to cut down on monthly costs, customers are generally interested, but because there is added expense in getting the services back, they usually decline this option.  Not having to pay another set-up charge would allow the customers an opportunity to more easily catch up on arrearage and establish a satisfactory payment history with the Company.
REQUEST NO. 186:
A.How many complaints has the Commission received from non-published and non-listed customers who felt they were not candidates for solicitation calls from U S WEST?
B.How many such customers complained that they continued to receive solicitation calls after informing the Company that they wished to no longer receive such calls?
C.Is it the Commission Staff's opinion that the provision of local service to a non-published or non-listed customer does not constitute an ongoing business relationship between U S WEST and that customer?  Explain why or why not.
RESPONSE NO. 186:Carol Cooper
A.Eight complaints were recorded specifically concerning solicitation calls from non-published customers in 1996.  All eight indicated they felt solicitation calls from U S WEST  were inappropriate.
B.One.  None of the remaining seven indicated an awareness that U S WEST would remove their names from the solicitation lists upon request.
C.The provision of local service to non-published and non-listed customers constitutes an ongoing business relationship.
REQUEST NO. 224:Bill Eastlake
A.On page 10, lines 7-12, is Mr. Eastlake suggesting that in past allocations between Title 61 and Title 62 services, the "incentive" actually operated?
B.If the response is affirmative, please explain how this occurred and provide all evidence supporting that conclusion.
C.If the response to "A" is negative, did Mr. Eastlake agree with the past allocations?  Why or why not?
RESPONSE NO. 224:Bill Eastlake
A.Staff has made no findings positive or negative as to whether the incentive did or did not actually operate.
C.Staff is unsure which specific allocations the Company might be referencing.  There have been no formal allocations since passage of the Telecommunications Act of 1988.
REQUEST NO. 225:Eastlake, pages 10-11, lines 20-25, 1-7
A.Isn't it true that in Order No. 18188, the Commission wanted non-basic services to provide a larger contribution to joint and common costs than basic services?
B.If so, then does a different contribution level (e.g., toll at 50% and basic exchange at 2%) constitute a subsidy?  Why or why not?
RESPONSE NO. 225:Eastlake, pages 10-11, lines 20-25, 1-7
A.I did not take part in that case, but my reading of Order No. 18188 is that the Commission wanted non-basic services to provide a larger contribution.
B.No.  Staff does not understand the Company’s base or reference point for defining what is “different.”  The implication that a different contribution level constitutes a subsidy is based on the fallacious assumption that cost is an absolute rather than the result of an allocation process.
REQUEST NO. 226:Eastlake
Is it Mr. Eastlake's contention that Companies that currently provide toll services will not also provide local services?  If so, why not?
RESPONSE NO. 226:Eastlake
No.  Some toll companies have already been or will become authorized to provide local services as well.
REQUEST NO. 227:Eastlake
Has Mr. Eastlake done any research to see how local competition is evolving in other states?  If so, where and what is occurring?  If not, why not?
RESPONSE NO. 227:Eastlake
No such formal research has been undertaken.  General information available casually suggests that competition is evolving first in larger, more urban areas with more market potential and that its shape there may be of limited relevance to Idaho.
REQUEST NO. 228:Eastlake
Mr. Eastlake, on page 12, lines 15-17, states no one is in competition locally with USW.  Does he include or exclude:
A.PCS service?  Why or why not?
B.Cellular service?  Why or why not?
C.Radio service?  Why or why not?
D.Apartment buildings or campus facilities where local service is provided by the property owner?  Why or why not?
RESPONSE NO. 228:Eastlake
A.These services are excluded because they are not regulated in Idaho, either as Title 61 providers or as Title 62.
B.See answer to A. above.
C.See answer to A. above.
D.This probably provides some competition, but of a very limited nature.  The service may still be provided by U S WEST, though in different form as it provides central facilities to a campus rather than individual access lines to each room.
REQUEST NO. 229:
A.When new entrants offer local service, will their rates be fully regulated in Idaho?
B.If not, will they have full pricing flexibility for both basic and non-basic services?
RESPONSE NO. 229:
Yes, under current Idaho law.
REQUEST NO. 230:Eastlake
A.Please provide all documentation supporting the assertion on page 13,
lines 2-4.
B.Please provide copies of VARTEC's plans which state Mr. Eastlake's conclusion.
RESPONSE NO. 230:Eastlake
A.Intrastate access charges from U S WEST of about 8.2 cents per minute offer only a small margin with a 10 cent a minute retail rate.  Intrastate calls originated or terminated on companies other than U S WEST would cost even more, making the possible margin even smaller.
B.The conclusion is based on the simple analysis in A. above and is not based on examination of any VARTEC plans.
REQUEST NO. 231:Eastlake
Mr. Eastlake failed to complete Ms. Owen's quote on page 13, lines 24-25 and page 14, line 1.  Does Staff believe that if costs are assigned away from the basic line to other  services such as toll, that this will encourage or discourage facilities-based competition?  If Staff believes it will encourage facilities-based competition, please cite all evidence upon which it  relies for that judgment.
RESPONSE NO. 231:Eastlake
Costs should be properly allocated.  However, Staff is unable to share U S WEST’s certainty that assignments away from the basic line will discourage facilities-based competition.  As pointed out in Rebuttal Testimony by Ms. Baldwin at page 24, new entrants will likely offer a package of services rather than just a basic line.  This alleviates concern over the extent that costs are “over-allocated to one service.”
REQUEST NO. 232:Eastlake
Does Mr. Eastlake agree that the USW proposal meets the needs of ITAP customers?  If not, why not?
RESPONSE NO. 232:Eastlake
Yes, as stated in rebuttal testimony at page 15, lines 19-25.
REQUEST NO. 233:Eastlake
A.Does Mr. Eastlake believe that if customers have only one line and no Title 62 service, they should have a different price for their line than others who use other higher contribution services?  Why or why not?
B.If your answer to "A" is affirmative, please state how the price should differ.  i.e., higher or lower and the level of the differential.
RESPONSE NO. 233:Eastlake
No.  It is sufficient that they experience a different monthly bill as a result of their decision not to take extra Title 62 services, as is now the case.
REQUEST NO. 234:Eastlake
A.Please clarify Mr. Eastlake's testimony on page 18, lines 2-8, is he asserting that the usage cost differences are significant?
B.Are these differences significant enough to warrant the residence/business price differences which are currently embodied in the rate structure?
C.If your response to C. is affirmative, please explain how these differences justify the current residence/business price ratios.
RESPONSE NO. 234:Eastlake
A.The question says “usage cost differences.”  I did not address cost differences.  I believe the usage differences are significant.
B.These differences are of the same general order of magnitude, but are not by themselves sufficient to warrant the business/residence price ratio that currently exists.  I have clearly asserted, at page 25, lines 5-20 of my Direct Testimony, that other factors are more important than cost.  In addition, I do not believe the cost data provided provides clear evidence concerning the relationship between  Title 61 residence and business costs.
REQUEST NO. 235:
Please provide all evidence upon which Staff relies for the conclusion that:
A.business service is more costly to provide than residence service.
B.the magnitude of cost differentials justifies the current business/residence price ratios.
RESPONSE NO. 235:   
A.Staff has never asserted such a conclusion since it does not believe that cost is the only factor to be considered.  For that same reason Staff has not attempted to formally dispute the Company’s assertions that some business costs appear lower than residence costs.  However, Staff points out that the Direct Testimony of Ms. Baldwin, at page 39, highlights the costly volatility associated with meeting Title 62 demand and its significantly greater churn.
B.Same as A above.
REQUEST NO. 236:Eastlake
Please define Mr. Eastlake's understanding of the historical use of the term "value of service pricing."  Is that definition predicated on a Commission's determination of value or the customer's perception of value?  Please explain.
RESPONSE NO. 236:Eastlake
It stems primarily from the economic theory of market pricing that sees price as the result of the interplay of demand and supply forces.  In the history of economic thought, primacy of place has gone to demand considerations.  A thing is worth what someone is willing to pay for it!  As stated by James Bonbright in Principles of Public Utility Rates (2nd Edition, page 88), “the value-of-service principle is taken most frequently to mean that principle of pricing under which the differences in the prices charged by a given enterprise for its various products are based not just on differences in the costs of production, but also on differences in the urgency of demand.”
The customer’s perception of value is of primary importance, and outside of markets someone has to make a judgment as to what that value is.  In a regulated world, such a judgment is made by regulators, subject to correction in formal public process or in informal comment, where customers have a chance to register their concurrence or dissent.
REQUEST NO. 237:Eastlake
A.Does Mr. Eastlake see a difference in the historical use of "value of service pricing" and market based pricing?  Please explain in detail.
B.If your response to "A" was affirmative, please list all differences between the two approaches to pricing including but not limited to the relationship to costs under each approach.
RESPONSE NO. 237:Eastlake
A.No.  Value of service has always provided the foundation of market pricing.  The flavor of that understanding is already stated in Rebuttal at pages 18-19.
REQUEST NO. 238:Eastlake
A.On page 19, lines 6-7, please provide all documentation relied upon by Mr. Eastlake to make this assertion.
B.If this assertion can be proven by Mr. Eastlake, please explain the significant price differences found between residence and business rates in Idaho.
RESPONSE NO. 238:Eastlake
A.Regulation is based on the belief that, in lieu of competitive pressure, a firm needs formal controls to keep it prices in line with its costs.  These costs include the necessary and prudent operational expenses associated with providing a product or service, plus a normal return on its invested capital.  Any standard text such as Charles Phillips, The Regulation of Public Utilities, (2nd Edition, 1988, page 168), sets forth essentially this view.
B.This overall view of the regulated operation of the regulated firm is not inconsistent with some individual deviation in the price-cost relationship.  There is no requirement that the price of each and every individual service exactly mirror its cost of service, especially where services are produced jointly from a common plant and there is severe difficulty in defining those individual costs.  For individual services there are a number of possible non-cost standards for reasonable rates.  The significant price difference between Title 61 residence and business rates has been argued in several previous cases and has withstood scrutiny sufficiently to win continued acceptance by this Commission, e.g. in Order No. 18188
(U S WEST) and Order No. 22464 (GTE).
REQUEST NO. 239:Eastlake
Please reconcile Mr. Eastlake's statements that regulation mandates cost-based pricing, as Mr. Eastlake asserts, (page 19, lines 6-7) and:  "Comparison to historical rates may not be the proper standard for judgment of what is reasonable in this case"  (page 9, lines 9-11), with his position that the narrowing of differential between residence and business prices for basic access lines, as USWC proposes, is not reasonable?  Be specific and provide all evidence and documentation to support the conclusion that narrowing the differential is not reasonable.
RESPONSE NO. 239:Eastlake
My statement at page 19, lines 6-7 says driven “primarily” by costs and allows for other considerations.  My statement at page 9, lines 9-11, is made as specific objection to a very long term adjustment of a historical rate by a price index.  These statements are not inconsistent with my argument that narrowing the differential is not reasonable in this case.
I have argued that the proposed narrowing of the differential is untimely since the rates determined in this case will likely be short-lived due to flux in the telecommunications industry.  I have argued that it is unfair to visit a proposed doubling of rates on only the residential customers.  I have argued that there are reasons beyond narrow cost considerations that the business rate was set where it is and I find no compelling reasons  to change it now.
REQUEST NO. 240:Eastlake
On pages 20-21, Mr. Eastlake clarifies his position of the measured service restructure.  Is it correct to assume that if there is a positive revenue requirement, Mr. Eastlake would agree with a 3 cent per minute charge?  Why or why not?
RESPONSE NO. 240:Eastlake
No.  The reasons are stated in Direct Testimony at page 28, lines 16-20 especially.
REQUEST NO. 241:Bill Eastlake, p. 9, lines 9-11
A.What is the proper standard to compare 1FR rates to?
B.What factors should the Commission consider in determining when a rate or price for service is "just?"
C.What factors should the Commission consider in determining when a rate or price for service is "reasonable?"
RESPONSE NO. 241:Bill Eastlake, p. 9, lines 9-11
A.Defining the proper standard was not attempted.  The point made was that long (comparison to 1958) historical experience is not in this instance a sensible standard and rarely should it be the only standard.  There may be good reasons, among them a complete restructure of the telecommunications industry, to think that new services and new technology could result in a complete redefinition of services and a complete restructure of costs.
B.“Just” should be judged by weighing affordability and value of service for different customer classes  against the Commission’s judgment of what is in the public interest.
C.“Reasonable” should by judged primarily by weighing cost of service in a historical context and with close attention to the allocation procedure which is used to apportion and define what are called costs.
REQUEST NO. 242:K. Stockton, p. 18, line 4
Please explain how a Company charges an expense to a shareholder.
RESPONSE NO. 242:K. Stockton, p. 18, line 4
The preferred methodology would be for a company, such as U S WEST, to effectively charge an expense to shareholders by booking the expense “below the line.”  A company could also charge an expense to shareholders by directly charging Retained Earnings.  A company could leave the expense in the account and allow the expense to flow through to the income summary.  The expense would be deducted from revenues and those revenues would then not be available for shareholder dividends, thus the expense would be indirectly charged to the shareholder.  For test years, this expense needs to be removed from reasonable expense levels.  This removal is not always accomplished and often is not easily caught.  Therefore, the first method is preferred to assure that the expense is not charged to customers.
REQUEST NO. 243 :Faunce, p. 2, lines 13-15
A. Please provide all documentation supporting Ms. Faunce's allocation system.
B.Show how it is superior to USWC's system.
RESPONSE NO. 243:Faunce, p. 2, lines 13-15
A.See Staff Exhibit No. 153, page 4, line 19, Column 2.
B.Staff did not use the word “superior”.  The cited reference discusses the settlement of affiliate transactions.  The Staff and the Company agreed to split the difference between the Staff and Company's Title 61 allocation as a settlement of the affiliate interests.
REQUEST NO. 244 :Faunce, p. 3, lines 16-19
A.How does Staff propose that USWC show that it's affiliate expenses are reasonable?
B.Please define the criteria that Staff would find acceptable for showing reasonableness of costs.
RESPONSE NO. 244 :Faunce, p. 3, lines 16-19
A.Merely showing that AT and Bellcore incurred expenses is not sufficient to meet the Company's burden of proof.  The Company could provide cost benefit analysis to show reasonableness.  Reasonableness could also be shown to benefit specific Title 61 services.  The Company could provide a specific timeframe when project benefits will flow to Title 61 customers/services.  The evidence should include detailed descriptions of benefits/services received by Title 61 customers associated with the costs assigned to Title 61 customers.
B.Any proof or description in plain English that shows the cost was incurred for the benefit of Title 61 customers and the benefit was reasonable for the cost.
REQUEST NO. 245:Faunce, page 4, lines 21-23
How does Ms. Faunce define "prudently incurred"?
RESPONSE NO. 245:Faunce, page 4, lines 21-23
When any average person would find that good judgement had been used in the use of resources to incur a benefit.
REQUEST NO. 246:Faunce, page 8, line 24 to page 9, line 2
What was Ms. Faunce's source for the statement "Title 61 customers do not have a say in AT's or BC's basic or applied research agenda as research is driven by market opportunities"?
RESPONSE NO. 246:Faunce, page 8, line 24 to page 9, line 2
This was determinedby reading the type of projects AT and BC are involved in.  For example, AT's 11203AP.  AT and BC projects are determined by the Company without direct input from to Idaho Title 61 customers or the Commission.
REQUEST NO. 247:Faunce, page 10, lines 10-12
USWC believes Ms. Faunce misread witness Barrington's workpapers.  Please provide Ms. Barrington's workpapers showing $245 or 6.399% going to Title 61 for project 12112AC.
RESPONSE NO. 247:Faunce, page 10, lines 10-12
Staff agrees the number should be $1,907 and the percentage should be 49.7986%.
REQUEST NO. 248:Faunce, page 16, lines 16-19
USWC does not agree with AT costs identified as "per Ms. Barrington's workpapers".  Please provide documentation and calculations showing how Ms. Faunce arrived at these numbers.
RESPONSE NO. 248:Faunce, page 16, lines 16-19
I used Ms. Barrington's workpapers (my Exhibit No. 154).  The Analysis Result column that identifies results as R=Title 61, D=Title 62, and C=Common to identify projects as Title 61 or Title 62 or Common.  Total cost Title 62 Idaho intrastate and total cost Title 61 Idaho  intrastate were Direct Charged.  The remaining Common cost projects for Title 61 and Title 62 as presented by USW was then shown.
REQUEST NO. 249:Faunce, page 17, lines 2-4
USWC does not agree with Bellcore costs identified as "per Ms. Barrington's workpapers".  Please provide documentation and calculations showing how Ms. Faunce arrived at these numbers.
RESPONSE NO. 249:Faunce, page 17, lines 2-4
I used Ms. Barrington's workpapers (my Exhibit No. 154).  The Analysis Result column that identifies results as R=Title 61, D=Title 62, and C=Common to identify projects as Title 61 or Title 62 or Common.  Total cost Title 62 Idaho intrastate and total cost Title 61 Idaho  intrastate were Direct Charged.  The remaining Common cost projects for Title 61 and Title 62 as presented by USW was then shown.
REQUEST NO. 250:Faunce, page 18, line 3
USWC disagrees that Ms. Barrington assigned projects to common for AIN service referred to as "do not disturb."  Please show where Ms. Faunce finds this assignment.
RESPONSE NO. 250:Faunce, page 18, line 3
See M. Barrington workpaper Project 10210AC, my Exhibit No. 154.
REQUEST NO. 251:Faunce, page 18, lines 3-4
USWC disagrees that Ms. Barrington assigned projects to common for support to business and government services.  Please show where Ms. Faunce finds this assignment.
RESPONSE NO. 251:Faunce, page 18, lines 3-4
See M. Barrington workpaper Project 11017AP and 10912TP, my Exhibit No. 154.  There may be other AT or Bellcore projects that are allocated to common for business and government service.
REQUEST NO. 252:Faunce, page 18, line 4
USWC disagrees that Ms. Barrington assigned projects to common for carrier billing.  Please show where Ms. Faunce finds this assignment.
RESPONSE NO. 252:Faunce, page 18, line 4
See M. Barrington workpaper Project 11957AP, my Exhibit No. 154.  There may be other AT or Bellcore projects that are allocated to common for carrier billing.
REQUEST NO. 253:Faunce, page 18, line 4
USWC disagrees that Ms. Barrington assigned projects to common for business customer products.  Please show where Ms. Faunce finds this assignment.
RESPONSE NO. 253:Faunce, page 18, line 4
See M. Barrington workpaper Project 4036AC, my Exhibit No. 154.  There may be other AT or Bellcore projects that are allocated to common for business customer products.
REQUEST NO. 254:Faunce, page 18, line 5
USWC disagrees that Ms. Barrington assigned projects to common for multi media.  Please show where Ms. Faunce finds this assignment.
RESPONSE NO. 254:Faunce, page 18, line 5
See M. Barrington workpaper Project 4016AC and Project 4036AC, my Exhibit No. 154.  There may be other AT or Bellcore projects that are allocated to common for multi media.
REQUEST NO. 255:Faunce, page 18, line 5
USWC disagrees that Ms. Barrington assigned projects to common for advanced services.  Please show where Ms. Faunce finds this assignment.
RESPONSE NO. 255:Faunce, page 18, line 5
See M. Barrington workpaper Project 60060AD, my Exhibit No. 154.  There may be other AT or Bellcore projects that are allocated to common for advanced services.
REQUEST NO. 256:Faunce, page 18, line 7
A.Is Ms. Faunce aware that out-of-period costs such as costs incurred in 1994 and booked in 1995 were removed from USWC's revenue requirement in adjustment #8?
B.Is Ms. Faunce asserting that not all out-of-period costs were removed in adjustment #8?
REQUEST NO. 256:Faunce, page 18, line 7
A.Yes.
B.No.  I was unable to identify specific projects which may have been included in the Company's Adjustment #8, so I reversed #8 and then removed projects identified as out-of-period.
REQUEST NO. 257:Faunce, p. 18, lines 6-8
Please identify the 1994 booked expenses in 1995, FCC services and other state-specific services that have been allocated to Title 61?
RESPONSE NO. 257:Faunce, p. 18, lines 6-8
See M. Barrington workpaper Project BC-090REF, BC-782307, and AT-10993TD, my Exhibit No. 154.
DATED at Boise, Idaho, this               day of March 1997.
______________________________________
Susan Hamlin
Deputy Attorney General
Proprietary Attachments
gdk:sh:i\wpfiles\umisc\response\\prdreq\usws965.rs6