USW318A.docx

1 BOISE, IDAHO, TUESDAY, MARCH 18, 1997, 1:15 P. M.
2
3
4 COMMISSIONER SMITH: Let's go back on the
5 record. Ms. Hobson.
6 MS. HOBSON: Thank you.
7
8 BILL EASTLAKE,
9 produced as a witness at the instance of the Staff,
10 having been previously duly sworn, resumed the stand and
11 was further examined and testified as follows:
12
13 CROSS-EXAMINATION
14
15 BY MS. HOBSON: (Continued)
16 Q Mr. Eastlake, I'd like you to take a look
17 at page 12 of your direct testimony.
18 A I have it.
19 Q It's your position, is it not, that
20 regulation provides a legal right to coverage of
21 prudently-incurred costs, is it not?
22 A I agree to that, yes.
23 Q And I wanted to talk with you for just a
24 minute about prudently-incurred costs. You had the
25 opportunity, did you not, to provide testimony in a case
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Wilder, Idaho 83676 Staff
1 which partially related to the prudency of certain
2 investments U S WEST planned to make? And I'm referring
3 to USW-95-1, also known as the 1994 revenue sharing
4 case.
5 A My 95's gets confused. I believe that's
6 the correct revenue sharing case.
7 MS. HOBSON: May I approach the witness?
8 COMMISSIONER SMITH: Yes.
9 (Ms. Hobson approached the witness.)
10 Q BY MS. HOBSON: Well, I'm about to hand you
11 a copy of the Order USW-S-95-1, so if I said 94, I meant
12 95.
13 A My name is there, so I must have been part
14 of it. I get confused on the relationship between the
15 case number and the revenue sharing year.
16 Q It was the '94 year and the case was in '95
17 and one of the issues in that case, was it not, was
18 whether or not U S WEST should be permitted to use
19 revenue sharing funds or partial revenue sharing funds to
20 replace certain analog switches in its southern Idaho
21 territory with digital switches?
22 A That's correct.
23 Q Do you remember that?
24 A I do.
25 Q I wonder if you would take a look at page 7
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1 of Order No. 26434 which is the Order in that case and
2 look at the indented paragraph on the bottom of that page
3 and review it silently to yourself for a minute.
4 MS. HAMLIN: Madam Chairman, if I may ask
5 for Counsel to provide me with a copy, too.
6 Q BY MS. HOBSON: Have you had an opportunity
7 to review that? Did the Commission in its Order
8 accurately capture your position with regard to the
9 switch replacement in that case in this Order?
10 A I believe so.
11 Q So would you read the indented paragraph
12 referring -- well, just read the indented paragraph.
13 A "U S WEST also argues that Staff witness
14 Eastlake recognized that the switch proposal would
15 provide benefits to Title 61 customers. The Company
16 states that Mr. Eastlake admitted that he did not take
17 issue with the prudency of the investment and further
18 admitted that the expensing of the switch replacements
19 benefited Title 61 rates. Mr. Eastlake's only
20 reservation was concerning whether Title 61 customers
21 would see a larger benefit from a direct credit, but he
22 had not made a calculation demonstrating the impact on
23 Staff's credit proposal of diverting 1.25 million to the
24 switch replacement proposal. Mr. Eastlake's testimony on
25 this point concluded with his concession that in addition
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Wilder, Idaho 83676 Staff
1 to the rate base benefits to Title 61 customers, they
2 also benefited from higher quality switching and new
3 services."
4 Q Thank you, Mr. Eastlake, and in your
5 reading, you have omitted, have you not, repeated cites
6 to the transcripts of the testimony in that case?
7 A Yes.
8 Q And I'm sure it reads a lot better without
9 that, but just so the record is clear there were
10 transcript citations?
11 A There were transcript citations, yes.
12 Q Now, under the Staff's advocacy in this
13 case, any digital switch replacement that was not
14 included in the original Tech Plus program would be
15 disallowed as being part of Title 61 expenses in this
16 case; isn't that true?
17 MS. HAMLIN: Object to that question,
18 Madam Chairman. That is beyond the scope of his
19 testimony.
20 COMMISSIONER SMITH: Ms. Hobson.
21 MS. HOBSON: Madam Chair, it's a very
22 generic question about the overall position the Staff is
23 taking on allocation issues. Mr. Eastlake repeatedly
24 throughout his testimony testifies as to what he believes
25 are appropriate allocations, that the U S WEST
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Wilder, Idaho 83676 Staff
1 allocations are inappropriate, Staff allocations are
2 appropriate. It goes back to the subject of subsidy and
3 so on. I'm not delving into an in-depth analysis, only
4 the overall question of whether the Staff is recommending
5 that no digital switching expense be included.
6 COMMISSIONER SMITH: Ms. Hamlin.
7 MS. HAMLIN: I would remind the Commission
8 that tomorrow we do have our allocation expert before the
9 Commission and Mr. Eastlake's testimony does not address
10 allocations.
11 COMMISSIONER SMITH: Well, it certainly
12 does address subsidies and to the extent that the
13 questions are the general overview and the witness'
14 understanding, to the extent he knows, he can answer.
15 THE WITNESS: Would you rephrase the
16 question?
17 Q BY MS. HOBSON: I merely asked that under
18 the Staff's advocacy in this case, any digital switch
19 replacement that was not included in the original Tech
20 Plus program is not to be included in Title 61 expense?
21 A I can tell you honestly I'm not sure
22 whether that is the advocacy that Staff has made.
23 Q Assume for me that that is the Staff
24 advocacy in this case. Do you have that hypothetical
25 assumption in mind?
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1 A Yes.
2 Q If that were the Staff's position, wouldn't
3 that mean that a cost that you yourself have called
4 prudent and that U S WEST has a legal right to recover is
5 being disallowed under that hypothetical assumption of
6 the Staff's advocacy?
7 MS. HAMLIN: Madam Chairman, I'll object
8 again. First, this is facts not in the record and
9 second, it's beyond the scope of his testimony.
10 COMMISSIONER SMITH: I'm going to overrule
11 the question. It's been asked based on this hypothetical
12 and his past testimony to answer this question and I
13 think it's a fair question.
14 THE WITNESS: My understanding of what I
15 testified in that case was that it was a completely
16 non-technical judgment. I was not being asked to make a
17 specific cost allocation and I suspect that had I been
18 asked to make such, my answer might not have been
19 identical. I was asked a sort of generic question about
20 whether there was some benefit to Title 61 customers from
21 these switches and the answer was a simple yes.
22 Q BY MS. HOBSON: And you also testified, did
23 you not, that you did not take issue with the prudency of
24 those investments?
25 A No, but I think the answer to that is the
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1 same as was given previously.
2 Q Within the context of that case, you didn't
3 take issue with the prudency of replacing analog
4 switching with digital switching?
5 A I did not. As I recall, my testimony in
6 that case did point out that I thought that the existing
7 switches were perfectly adequate for providing Title 61
8 services and I did that, well, as part of the same case.
9 Q In addition, you also concluded that there
10 were Title 61 benefits and that the investment was not
11 imprudent; isn't that true?
12 A I did make that assertion. That was not a
13 formal cost allocation analysis.
14 Q I'm not suggesting that it was. Would you
15 please turn back to page 6 of your testimony?
16 A Page 6?
17 Q Uh-huh.
18 A Yes.
19 Q And would you read your testimony beginning
20 on line 16 and concluding on line 21, "The Company is
21 not..."?
22 A "The Company is not approaching the current
23 reform of the telecommunication market offering some sort
24 of quid pro quo, indicating a willingness to give up some
25 small portion of its return on regulated services as the
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Wilder, Idaho 83676 Staff
1 price of entry into the competitive markets it has always
2 sought to enter."
3 Q Mr. Eastlake, isn't that statement
4 inconsistent with your other statement that regulation
5 provides a legal right to coverage of prudently-incurred
6 costs, the suggestion that the Company should be allowed
7 or be required to give up something?
8 A I think it's a much too literal
9 interpretation to call that an inconsistency. I don't
10 think -- I was not suggesting that the Company's legal
11 right to a return on its prudent 61 investments was in
12 question here. I was merely suggesting, as I pointed out
13 in, again, in an answer to an interrogatory which is not
14 on the record yet, that ordinary businesses often make
15 such decisions that they're willing to take a little less
16 in one market so they can get into another market which
17 they find more profitable and that's the only suggestion
18 I was trying to make, no conclusion about withdrawing
19 your legal right to a return on 61 services.
20 Q So it's not your position that the Company
21 should be required to give up something to which it has a
22 legal right?
23 A I did not mean to assert a formal
24 requirement, no.
25 Q Okay. I believe that the data response
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Wilder, Idaho 83676 Staff
1 that you may be speaking of is No. 60 in the U S WEST
2 second production request.
3 A That is the one to which I'm referring.
4 Q Do you have that handy?
5 A I have it.
6 Q Am I correctly excerpting that answer with
7 a quotation, "It could be a sound business decision for a
8 company to accept lower returns in one phase of its
9 business in order to develop higher returns in a new and
10 expanding phase of the business"; is that a correct
11 quotation of your answer?
12 A That is.
13 Q Now, this case that we're currently engaged
14 in is not about establishing returns for Title 62
15 operations, is it, Mr. Eastlake?
16 A No, it is not.
17 Q Is it your position that U S WEST should be
18 granted a lower rate of return in its Title 61 operations
19 in exchange for its Title 62 pricing freedoms?
20 A No, it is not. I said that in the last
21 question.
22 Q Okay, would you please look at page 17 of
23 your direct testimony?
24 A I have it.
25 Q At line 19, you make the statement that one
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Wilder, Idaho 83676 Staff
1 of the reasons that U S WEST wants to raise its residence
2 rates is to "hinder competition by making resale more
3 expensive to potential competitors." Is that your
4 testimony?
5 A Yes, it is.
6 Q Now, I want you to assume with me for a
7 moment hypothetically that if U S WEST currently sells
8 its retail local service below cost, specifically its
9 residence service below cost, that's a hypothetical
10 assumption, then wouldn't it be appropriate for the
11 Company to attempt to seek a price increase prior to
12 having to sell a below cost service at a further
13 discount?
14 A Given the proviso that I don't accept your
15 hypothetical, yes.
16 Q Given that the resale rate will be
17 discounted below the retail rate, how does the relative
18 level of the retail rate have any relevance to whether
19 competition is hindered or enhanced?
20 A Well, what this was meant to say initially
21 was that higher rates make it more expensive for
22 resellers, people who would have to purchase that service
23 from U S WEST.
24 Q It's simply a cash flow issue, isn't it?
25 A Well, yes.
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Wilder, Idaho 83676 Staff
1 Q I'd like you to look at your surrebuttal
2 testimony now at page 9.
3 A I have it.
4 Q At line 4 on page 9, you make the
5 statement, "Second, determining what is a `reasonable'
6 rate should not be prejudiced by looking at a single
7 number." Can you tell us what the single number is that
8 you were referring to in that testimony?
9 A I was referring to the consumer price index
10 or the 1FR rate escalated 37 years by the consumer price
11 index that was cited by Ms. Wright or Ms. Owen. I'm not
12 sure which one.
13 Q I don't want to argue with you, but would
14 you go back and read your testimony on page 8 up to and
15 then coming over on page 9 just prior to that sentence
16 and think about my question which was what is the single
17 number that you were referring to?
18 A Okay, I misstated in the previous answer.
19 That is not the reference. Yeah, this was a reference to
20 a calculation using my rate design guidelines and the
21 Staff's revenue requirement to generate a rate and that's
22 the single number, that 6.50 calculation that was done by
23 the Company and was essentially correct given the numbers
24 that were there. Now, the question is?
25 Q Okay. Well, is it your position that one
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1 should not determine the reasonableness of a cost
2 allocation proposal by looking at the rates which follow
3 from it?
4 A That is, yeah, that is my advocacy, that
5 6.50 could be right.
6 Q And so could 25?
7 A Yes, I would agree with you.
8 Q Okay, look then to the subject on page 9
9 that you started to earlier address which is the use of
10 the CPI.
11 A Yes.
12 Q And on line 16, you begin a sentence there
13 which states, "A service itself often changes
14 qualitatively and substitutes come into being so people
15 no longer buy exactly the same product." That's your
16 testimony, isn't it?
17 A I know I said that. I can't find it here.
18 Q Page 9, line 16.
19 A Oh, okay, yes.
20 Q Now, this qualitative change has occurred
21 over the last several years in telephone service, hasn't
22 it, you know, over the 37-year period that we seem to be
23 discussing for the CPI?
24 A There has been large qualitative change.
25 Q And I'd like to list some of the changes
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Wilder, Idaho 83676 Staff
1 that I could think of and see whether you agree with me
2 or not, these are some of the qualitative changes have
3 occurred during that period.
4 A All right.
5 Q We have moved, have we not, from a network
6 where there were party lines to a network where there's
7 exclusively single line service?
8 A That's my understanding.
9 Q And that touchtone service has been
10 included in the basic residence and business service?
11 A That's correct.
12 Q And we've also included trouble isolation
13 in the basic rate?
14 A I understand that, yes.
15 Q And over the last 37 years, step and
16 crossbar technology has been replaced largely by digital
17 switching?
18 A I believe that's correct, yes.
19 Q And following the Tech II investment in
20 Idaho, customers are now able to pretty much rely on
21 being able to use service for data at 9600 bits per
22 second, if not higher; is that true?
23 A I believe so.
24 Q Look at page 11, line 11 of your
25 surrebuttal testimony.
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1 A All right.
2 Q There you make the statement, "Competition
3 must be limited to Title 61 regulated companies that
4 provide residential and small business service." Is that
5 your testimony?
6 A Yes, it is.
7 Q Is it really your position that the only
8 competition that is relevant in this case is from
9 regulated Title 61 companies?
10 A It could be more aptly phrased. I'm not
11 asserting that it's not possible for other firms to
12 provide Title 61 competition. I am asserting that there
13 is no Title 61 competition at this time and that the only
14 competition that the Company is talking about is actually
15 Title 62 competition which is not relevant.
16 Q I understand that position of Staff's. I'm
17 just trying to understand this testimony. You did not
18 mean --
19 A Yes, I did not -- no, I did not mean that
20 the universe of competition now or in the future was
21 limited to only currently existing 61 regulated
22 companies.
23 Q Or even new companies that come in and
24 somehow find themselves regulated under 61.
25 A Right.
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Wilder, Idaho 83676 Staff
1 Q Mr. Eastlake, if U S WEST did face
2 effective competition in Title 61 services, and I want
3 you to assume whatever you need to assume that it is
4 effective in your mind, if U S WEST did face effective
5 competition in Title 61 services, would it be necessary
6 for this Commission to set Title 61 prices?
7 A Under current law, yes.
8 Q From the standpoint of a professional
9 economist.
10 A To the extent that regulation is meant to
11 be an alternative to the regulating force of competition,
12 once effective competition exists, regulation can cease.
13 Q So aren't you really saying that the only
14 competition that you would find relevant to Title 61
15 ratemaking is competition that would in effect eliminate
16 the need for Title 61 ratemaking?
17 A I think that follows.
18 Q In the final analysis, you agree,
19 Mr. Eastlake, do you not, agree with the Company, that
20 competition will drive prices toward cost and not
21 necessarily down?
22 A I have asserted such or agreed to such,
23 yes.
24 Q So eventually, then, the market and not the
25 Commission will decide how competitive firms recover
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1 joints and common costs; isn't that true?
2 A I think that's fair.
3 Q In the meantime, would you agree that the
4 Commission's role is to approximate as best it can the
5 actual workings of a competitive marketplace as it
6 existed?
7 A That's a tougher question to provide good
8 guidance on. The transition from regulation to
9 competition is one for which we don't have much
10 historical experience and I think it's a very tough
11 policy decision on how most people would say you can't --
12 there are people who say you should deregulate at the
13 stroke of a pin and let the world sort itself out. I
14 think more often advocates of regulation would assert
15 that there's some public interest that needs to continue
16 to be watched over during some sort of an interim
17 period. Exactly what the steps are in that interim
18 period is a tough one to define.
19 Q What I'm asking, though, is the question of
20 what kind of policy the Commission should operate under
21 as it attempts to regulate in a transition period and
22 specifically, my question was, shouldn't the Commission's
23 role be to approximate as best it can the actual workings
24 of the marketplace once it becomes competitive?
25 A I don't believe so. I think we are --
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1 given the passage of the federal Telecom Act and changes
2 that evidently are about to happen in the state telecom
3 legislation that competition is close enough in a sense
4 that we would be as well advised to let competition,
5 which is in some sense right around the corner, begin to
6 sort out some of these things rather than trying to go
7 through the entire complex of telecom rates at this
8 moment and guess what the right market answers would be.
9 Q I'm sorry, Mr. Eastlake, but I'm having
10 trouble hearing you, so I don't know if you can get any
11 closer.
12 A I can get closer, yes.
13 Q So in your view, would the ideal solution
14 be for the Commission just to not do anything at all
15 about rates until such time as the marketplace becomes
16 competitive and then just let the marketplace take over?
17 A I tend more to that side of the spectrum of
18 policy choices, yes.
19 Q Do you believe that facilities-based
20 competition is in the best interest of Idaho customers?
21 A At the gut level, I'm not certain
22 personally whether I have a preference for
23 facilities-based versus resellers.
24 Q Well, if you don't have facilities-based
25 competition, are you convinced that you're going to see
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Wilder, Idaho 83676 Staff
1 the innovation and technological advances that have been
2 envisioned by many proponents of competition in the
3 telecom market?
4 A I have no doubt that there will be some
5 facilities-based competition and I suppose I agree with
6 the majority of people who think that most competition
7 early on will be resale competition. I don't have a good
8 sense of what the appropriate mix of the two would happen
9 to be. I mean, in general, I think I've been a person
10 who tries to debunk the folks who say there will be no
11 incentives for facilities-based competition because I
12 think that requires an assertion and it's usually being
13 made by the incumbent monopolists that they best know how
14 to provide service and they know what the costs for
15 everyone in the world are and no one could possibly do it
16 better and I seriously wonder whether technological
17 innovation and entrepreneurship and the like might not
18 provide facilities-based competition sooner than we
19 expect in ways that we can't guess at now, but I don't
20 have a strong feeling about the mix of them.
21 Q Well, and assuming that your hypothesis is
22 correct, wouldn't you agree that facilities-based
23 competition would be in the best interest of Idaho
24 consumers if we were to see innovation and
25 entrepreneurism and those factors you mentioned?
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1 A I could agree with that, but I think resale
2 competition itself could also be in the best interest. I
3 mean, I'm not sure that advocating or accepting that as a
4 possible outcome of facilities-based competition really
5 requires a negative statement about resellers. I think
6 much of the competition we have in the world today is
7 just resale when you come right down to it and it's not
8 as nearly negative a term as I think is currently used
9 with respect to telecommunications resellers.
10 Q Well, and, Mr. Eastlake, I'm not trying to
11 persuade you or to get you to say anything negative about
12 resale competition. I'm only asking you the simple
13 question of whether you believe facilities-based
14 competition is in Idaho consumers' interest.
15 A And the answer is yes.
16 Q Don't reductions to rates for 1FR and 1FB
17 service discourage the development of facilities-based
18 competition simply because the price spread isn't there,
19 the cost spread isn't there?
20 A They provide the sort of incentive or lack
21 of incentive you suggest only if you assume that the
22 incumbent's costs are the same as everyone else's costs.
23 The statement that I alluded to or made in the last
24 question really indicated my disbelief that it was always
25 true. I'm not sure that you can say a $10.00 1FR rate is
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Wilder, Idaho 83676 Staff
1 not enough to generate new business. A $20.00 rate would
2 generate, given your assumptions would generate, more
3 incentive for folks to, facilities-based competitors to,
4 enter, but I'm not sure that the business outlook is as
5 U S WEST sees it for facilities-based competitors, that
6 it appears so terrible to those facilities-based
7 competitors' future or potential.
8 Q And the fact that facilities-based
9 competition in the business market looks more reasonable
10 and more likely to you is based on the fact that that
11 service is today priced at a much higher level, isn't it?
12 A Would you restate the question?
13 Q I said the fact that you see more
14 opportunity for facilities-based competition in the
15 business market is based on the fact that there is a
16 greater price currently being charged for that service by
17 the incumbent, isn't it?
18 A Well, price is one of the many factors
19 which make business a more potentially lucrative market
20 for any competitor.
21 Q Sure, and regardless of what the costs
22 actually are, the greater spread between the market's,
23 the current market's, price and those costs, the more
24 likely it is that you're going to find people providing
25 facilities-based competition; right?
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1 A That's true.
2 Q I want to talk to you for a minute about
3 the business-residence ratio and in order to do so, I
4 want you to look back on page 23 of your direct
5 testimony.
6 A All right.
7 Q Now, that testimony was filed last November
8 before U S WEST made various adjustments to its revenue
9 requirement and resulting rates, but at that time you
10 calculated a ratio of business to residence rates
11 proposed by U S WEST to be 1.38 to 1, correct, back in
12 November?
13 A I believe that is the number.
14 Q It looks like it's on line 15 at page 23.
15 A Okay, yes.
16 Q It's in your direct.
17 A Yes, I'm sorry. I was on the wrong page.
18 Q Now, based upon the most recent rate spread
19 provided by U S WEST, have you recalculated the
20 business-residence ratio, the U S WEST proposed rates?
21 A I have not -- no, I have not.
22 Q Would you accept, subject to check, that it
23 is 1.55 to 1?
24 A That sounds correct, 31.10 divided by 20,
25 that's correct.
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1 Q Okay. Now, in your testimony you insist
2 that the Commission should stick with the historic
3 2.59 to 1 ratio going forward out of this case.
4 A That's correct.
5 Q And one of the reasons is your statement on
6 page 24 of your direct testimony that you don't believe
7 that the cost data provided by U S WEST on this point has
8 cost allocated correctly; isn't that true? It's on
9 page 24.
10 A Line 18?
11 Q Uh-huh.
12 A That's sort of a throw-away observation. I
13 would still --
14 Q Well, would you read your testimony
15 beginning on line 18?
16 A "Given uncertainty about appropriate cost
17 allocation procedures, Staff does not believe the Company
18 has made a clear showing that the differing business and
19 residence investment costs cited to show that a business
20 line might be cheaper than a residence line make use of
21 costs solely associated with Title 61 business."
22 I would still agree with that statement.
23 I've not made an exhaustive study of U S WEST's business
24 costs. I don't believe that U S WEST has made what I'd
25 call a significant showing with respect to those costs in
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Wilder, Idaho 83676 Staff
1 this case, but my uncertainty is still operative and, as
2 I recall, Mr. Elder in his testimony that would have been
3 on Tuesday of last week, I believe, was asked
4 specifically the question whether -- I don't know whether
5 it was of the cost of loop length for residence versus
6 business, whether those business loop study costs
7 distinguished between 61 and 62 business and he said no.
8 It's that uncertainty about the careful distinction
9 between 61 and 62 business costs which leaves me with
10 just a feeling that the cited 61 business costs here may
11 not be perfect.
12 Q And they may not perfectly show that a
13 business line is cheaper than a residence line; correct?
14 A Yes.
15 Q That's what your testimony says here?
16 A Yes.
17 Q So to make a long story short, you believe
18 that U S WEST's business-residence ratio is not
19 adequately cost supported?
20 A Yes, but I would add that I have not
21 attempted to get inside those costs at a detailed level
22 to criticize them one way or another and the reason for
23 that is I think cost is only one of many factors and,
24 therefore, I moved on to something else.
25 Q Well, Staff, on the other hand, has no cost
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1 data that supports its proposed business-residence ratio;
2 isn't that right?
3 A That is correct. It's based on Staff's
4 assertion that cost is neither the only nor the most
5 important factor that should determine that
6 business-residence price ratio.
7 Q And Staff has no cost data that supports
8 the conclusion that business is more expensive to provide
9 than residence service?
10 A That's correct.
11 Q Now, back now to your surrebuttal on
12 page 19.
13 A I have that.
14 Q Do you have that?
15 A Yes.
16 Q Would you please read the sentence
17 beginning on line 6 and concluding on line 7?
18 A "Regulation, on the other hand, is driven
19 primarily by cost."
20 Q So shouldn't the relative ratio of rates
21 within the Title 61 group be primarily driven by cost?
22 A I think the statement that regulation is
23 driven primarily by cost applies at the macro level, if
24 you will, at the revenue requirement level, and does not
25 and need not apply specifically to each of the individual
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1 services and products that fall within the entire revenue
2 requirement or the entire Company operation.
3 Q So while regulation is driven by cost, you
4 don't believe that cost should be relevant to the rate
5 spread even at this late day in the history of telecom
6 regulation? By "late day," I mean as we move --
7 A I don't believe I've said they're not
8 relevant. I have said they're not the only and not the
9 most important factor to be used in determining rates.
10 Q And I believe you've said that the most
11 important factor is value of service?
12 A I think that's fair, yes.
13 Q And you have indicated, I believe, that --
14 let me see. If you look on page 18 of your surrebuttal
15 at line 18, line 19, I guess, you make the statement
16 there that a competitive market is cost-based mostly in
17 the sense that costs provide a floor below which
18 competition cannot drive the price on a permanent basis.
19 A Yes.
20 Q In markets, firms look first to demand and
21 to value of service considerations.
22 A That's correct.
23 Q That's your testimony? Isn't it true that
24 markets first look at whether a proposed price covers its
25 cost and then looks at what the market will bear to
2275
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Wilder, Idaho 83676 Staff
1 decide what level above cost it will set its price?
2 A I think that's a distinction without a
3 difference, however they say that. I think it's very
4 nearly the same as my assertion.
5 Q In other words, a rational competitive
6 market player would not look first at value of service
7 and second at cost? He'd first decide whether his price
8 is going to cover his cost; right?
9 A Well, I don't think it can be characterized
10 black and white, one or the other way. I have heard
11 business folks talk about there's a market people would
12 be willing to pay X for such service and then they go out
13 and begin to see if they could find some way to provide
14 it, what it would cost to provide something that they
15 know people would be willing to pay X dollars for and it
16 can sometimes go the other way as well, I suppose. If
17 you want to produce beer and you know how much beer
18 costs, then you go out and see what you can get for it.
19 Q But a rational businessman would not
20 conclude that there is a value of service or a value in
21 the price and then decide to offer the service if he
22 determined later on he couldn't cover his costs at that
23 price?
24 A No, ultimately one must cover costs, yes.
25 Q So doesn't it follow that in this arena
2276
CSB REPORTING EASTLAKE (X)
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1 where the Commission is being asked to look at the
2 appropriate price to be set for a company that is not
3 free to set its own rates, doesn't it follow that value
4 of service pricing should apply only after the Commission
5 has determined that the prices cover costs?
6 A I don't believe that follows and I think
7 there are a number of instances within U S WEST's current
8 pricing structure which indicate that U S WEST is already
9 charging prices based more on value of service than on
10 cost. Ms. Wilson Monday mentioned the appropriateness of
11 value of service in determination of privacy charges.
12 Wayne Hart reminds me that in the Company's service
13 guarantee program, the credit that's given for missed
14 appointments and the like by the Company is $40.00 for
15 business and $10.00 for residence, a 4 to 1 ratio, much
16 worse than the 2.5 to 1 ratio we're talking about here,
17 so there are value of service considerations that play a
18 part throughout the existing price structure.
19 Q Well, my question was, doesn't it follow
20 that the Commission which is required here to set prices
21 for U S WEST which is not itself permitted to choose its
22 own prices for Title 61 service, doesn't it follow that
23 the Commission should look at value of service pricing
24 concerns only after it has determined whether the prices
25 cover the relevant costs of the services they're pricing?
2277
CSB REPORTING EASTLAKE (X)
Wilder, Idaho 83676 Staff
1 A Well, the Commission in my reading of past
2 orders has already made that decision in several cases
3 cited in my direct testimony. This discussion about the
4 appropriate level of business-residence price ratios is
5 not a new one for the Company or for the Commission. It
6 has been exposed -- exposed. It's been played out before
7 the Commission and the Commission has decided no, to
8 leave business-residence ratios where they are at least
9 twice before and I know of no overwhelming evidence of
10 changes that have occurred in the recent past which make
11 me think that that decision needs to be changed.
12 Q Look at page -- let's see. I guess this is
13 your direct testimony. You indicated that revenue
14 sharing money will likely still remain for distribution
15 after the rate here goes into effect; correct?
16 A Yes.
17 Q And you recommended disposal of all of the
18 remaining funds other than those that have been earmarked
19 for EAS implementation, originally in your direct
20 testimony, over a four-month period; is that correct?
21 A Four months is the time that was noted in
22 the original testimony, yes.
23 Q In your surrebuttal testimony, however,
24 you're now recommending a one-time credit for the revenue
25 sharing money; is that correct?
2278
CSB REPORTING EASTLAKE (X)
Wilder, Idaho 83676 Staff
1 A That's what it says. That is a detail,
2 what I consider a rather inconsequential detail,
3 frankly. You don't want to stretch it out too long.
4 Ideally, I'd do it all in one shot. I think the
5 administrative convenience of a company ought to be a big
6 factor in what's the easiest way to do this and how long,
7 I suppose, depends also on the exact level of that amount
8 that needs to go back.
9 Q Well, have you calculated the amount of the
10 credit that would be given?
11 A It's in one of these exhibits in the
12 surrebuttal.
13 Q I'm looking at page 25 of your written
14 surrebuttal testimony.
15 A Okay, and the calculation is on
16 Exhibit 152. Yeah, the calculation amounted to $14.94.
17 Q So using Staff's proposed rates for
18 Title 61, doesn't your recommendation mean that residence
19 customers will be receiving a $14.94 credit against a
20 $10.17 rate in region and an $8.82 rate out of region?
21 A If the math works out that way, yes.
22 Q Now, once again assume with me
23 hypothetically that U S WEST's rates, proposed rates, are
24 accepted. Under the stipulation, residence customers
25 will first get a $1.00 credit associated with the yellow
2279
CSB REPORTING EASTLAKE (X)
Wilder, Idaho 83676 Staff
1 pages; right?
2 A That's correct.
3 Q And we have enough remaining revenue
4 sharing dollars to provide a one-time $14.94 credit, but
5 wouldn't it be more consumer-focused to provide a smaller
6 credit over a longer period if there is to be a rate
7 increase in this case?
8 A I think it probably would.
9 Q Mr. Eastlake, before we went on the record
10 this afternoon, I asked you if you could locate your
11 workpapers that you have used in connection with
12 developing the rate spread that you're offering in this
13 case.
14 A And I have them here.
15 Q If I could find my version, we'd be in
16 great shape.
17 MS. HOBSON: Do you want this marked as a
18 Staff exhibit?
19 MS. HAMLIN: Could we go off the record?
20 COMMISSIONER SMITH: Sure, let's be at ease
21 for a moment.
22 (Off the record discussion.)
23 (Staff Exhibit No. 164 was marked for
24 identification.)
25 COMMISSIONER SMITH: Okay, let's go.
2280
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Wilder, Idaho 83676 Staff
1 Ms. Hobson.
2 MS. HOBSON: Thank you.
3 Q BY MS. HOBSON: Mr. Eastlake, you've been
4 handed what has been previously marked as Staff
5 Exhibit 164. I'd ask you if you could just briefly
6 identify that for the record.
7 A It is a spreadsheet that has the recurring
8 rates for residence and business and it spreads the --
9 and is used as a tool to spread the appropriate revenue
10 requirement. It has quantities and rates, basically.
11 Q Did you prepare this document?
12 A I did.
13 Q I noticed in the little box that's up in
14 the upper left-hand corner that for the 1FR base -- well,
15 yeah, the 1FR base, the Staff has a number of 14.86 and
16 U S WEST has a number of 15.62.
17 A Yes.
18 Q Am I correct that the difference between
19 those numbers, i.e., $.76, is the rural zone credit?
20 A That's correct.
21 Q And when I look further over on the columns
22 contained in that same box, I see the subcolumn labeled
23 "EAS adder" and for U S WEST, the EAS adder is 3.62 and
24 for Staff it is $1.35.
25 A That's correct.
2281
CSB REPORTING EASTLAKE (X)
Wilder, Idaho 83676 Staff
1 Q Is that also the differential between the
2 in region and out of region rates for the two regions?
3 A It is. That's what the real meaning of EAS
4 adder is in my sense.
5 Q And, Mr. Eastlake, in your opinion, does
6 the $1.35 differential constitute value of service
7 pricing relative to the benefits received by Title 61
8 residence and small business customers in region and out
9 of region?
10 A No, the $1.35 is a direct calculation of
11 the per line amount of annual costs associated with the
12 U S WEST-supplied capital and operating expenses which
13 are in the pro formed revenue in part of the EAS
14 adjustment.
15 Q So in this particular area, Staff is not
16 recommending a value of service pricing differential?
17 A We had to have some differential. We were
18 solving for a differential and since I had calculated
19 what the per line cost was associated with the cost, EAS
20 cost, numbers that we'd accepted from the Company, I
21 thought that was an appropriate number to use and so it
22 was thrown into there as the first attempt at modeling
23 this.
24 Q So it's cost-based and not
25 value-of-service-based?
2282
CSB REPORTING EASTLAKE (X)
Wilder, Idaho 83676 Staff
1 A Yes.
2 Q Okay, looking down now farther on the
3 exhibit to the actual spread, I see a column labeled
4 "Staff Proposed Rate" and that's Column No. 6.
5 A Yes.
6 Q And what I'm trying to get to now is the
7 spread between the 1FR and the unlimited ITAP rate.
8 A All right.
9 Q Would I be correct that we are comparing
10 $10.17 for the 1FR with $7.22 for the unlimited ITAP
11 customer?
12 A That's correct.
13 Q Now, currently the differential between the
14 flat rated 1FR and the ITAP rate, that is, the $12.00 1FR
15 and the ITAP rate, is $3.50 to match the federal TAP
16 support which covers the CALC; isn't that right?
17 A I believe so.
18 Q Why does the Staff reduce this differential
19 to only 2.95 in your proposed rate spread?
20 A This rate spread was based on -- it's
21 really built around Column 5, "Ratio to 1FR." The
22 numbers in that column are frozen at the current levels,
23 from current U S WEST rates and I have simply ratioed,
24 used the existing ratios of all the rates involved here
25 to 1FR and I've used those to calculate a first cut at
2283
CSB REPORTING EASTLAKE (X)
Wilder, Idaho 83676 Staff
1 new Staff rates using Staff revenue requirement.
2 Q So am I correct in assuming that you're not
3 making some judgment about the appropriateness of an ITAP
4 rate which provides a differential that is less than
5 $3.50 under the federal program that provides the
6 matching credit?
7 A At this point, I have simply mechanically
8 replicated the existing ratios given Staff's revenue
9 requirement.
10 MS. HOBSON: Thank you. That's all I had.
11 COMMISSIONER SMITH: Mr. Harwood, did you
12 have questions?
13 MR. HARWOOD: Just a couple,
14 Madam Chairman.
15
16 CROSS-EXAMINATION
17
18 BY MR. HARWOOD:
19 Q Good afternoon, Mr. Eastlake.
20 A Good afternoon.
21 Q Do you recall talking with Ms. Hobson about
22 this $14.00 and change credit that would be available
23 from the revenue sharing funds?
24 A Yes, I do.
25 Q And if I recall, Ms. Hobson asked and you
2284
CSB REPORTING EASTLAKE (X)
Wilder, Idaho 83676 Staff
1 agreed that spreading that $14.00 and change credit over
2 time to customers would be more consumer-focused than a
3 one-time credit?
4 A Yes.
5 Q Isn't it true that $1.00 is worth more
6 today than it is tomorrow?
7 A I cannot dispute that. I usually have to
8 remind other people of that.
9 Q So wouldn't it be true that a one-time
10 credit up front would be most beneficial to consumers?
11 A It would.
12 Q My last question is do you know who is
13 receiving the interest on these revenue sharing funds
14 presently?
15 A The answer is I suppose I don't technically
16 know. I think we are -- I think that the ratepayers or
17 the Commission is no longer receiving it, which I assume
18 means that U S WEST is, somebody is.
19 Q So you would agree that U S WEST could be
20 receiving interest on this money?
21 A And that would be a factor, I suppose, that
22 would militate spreading this over a year as opposed to
23 returning it in a shorter period of time.
24 MR. HARWOOD: No more questions. Thank
25 you.
2285
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Wilder, Idaho 83676 Staff
1 COMMISSIONER SMITH: Thank you. We're
2 ready for questions from the Commission.
3 Commissioner Nelson.
4 COMMISSIONER NELSON: I just have one.
5 Thank you.
6
7 EXAMINATION
8
9 BY COMMISSIONER NELSON:
10 Q In proposing the rate spread between the
11 business rate and the residential rate, did you do any
12 study to determine in your mind that that was an
13 appropriate spread today or are you just adopting what
14 was in place in the past?
15 A I am very consciously attempting to mirror
16 the existing rate spread, thinking that the results of
17 this probably last embedded cost rate case for a variety
18 of reasons at the national and state level are going to
19 be superseded with changes brought about by competition
20 and I simply think it's not a good investment of time to
21 do a lot of soul-searching on changing, altering, getting
22 these rates just right because I think these rates are
23 not going to be in existence very long, and I think it's
24 very unlikely that we would correctly mimic the market
25 and define all the appropriate ratios so that it wouldn't
2286
CSB REPORTING EASTLAKE (Com)
Wilder, Idaho 83676 Staff
1 need to be changed ever again and to save ourselves the
2 effort, I have done a rather mechanical ratio here.
3 Q Well, if we could correctly assume that
4 we're not going to get it exactly right, wouldn't we
5 nonetheless make an effort to move towards what we see
6 the trend being?
7 A I think that's a defensible position, but
8 I've chosen not to take that myself.
9 Q Why wouldn't we do that?
10 A I think somebody pointed out to me the
11 example of airline deregulation. The assertion here is
12 that business rates have got to go down or that to get
13 business rates relatively down, we have to raise -- we
14 will raise residential rates a lot and leave business
15 where it is. All of that is built around the assumption
16 that business rates need to come down for some
17 competitive reasons.
18 I think the airline industry is a terrific
19 example of the fact that we've got competition in places
20 where we never had it before. I can get to see my kids
21 on the Coast for $29.00, but there are business
22 customers -- there are rates that have gone up and there
23 are business customers who don't want to cattle-call
24 board, not know if they've got a flight, and they're
25 willing to pay more than they used to to get the kind of
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Wilder, Idaho 83676 Staff
1 service that they want. I'm not sure it's a foregone
2 conclusion that we know where business rates ought to go
3 or even that we know they need to go down.
4 COMMISSIONER NELSON: Gosh, I hate using
5 the airline industry as an example. Okay, thank you.
6 COMMISSIONER SMITH: Commissioner Hansen.
7 COMMISSIONER HANSEN: Thank you. I just
8 would like to clarify a couple of items.
9
10 EXAMINATION
11
12 BY COMMISSIONER HANSEN:
13 Q Mr. Eastlake, as I look at your Exhibit
14 No. 151 and your workpapers, is the rate difference that
15 you're proposing between EAS and non-EAS routes $1.35?
16 A That's correct.
17 Q And that's based on cost?
18 A That is derived from the costs that are
19 indicated that are on Exhibit 101. The EAS costs that
20 were put in there, I have simply taken the return on
21 capital cost and added to that operational expenses that
22 lumped together comes out to $4 million and you divide
23 that by 260,000 odd customers and the $1.35 is the
24 answer, yes.
25 Q So far we've looked at EAS in a lot of
2288
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Wilder, Idaho 83676 Staff
1 different ways and I've got a way that I'd kind of like
2 to just run by you to look at it in a little different
3 format and get your opinion on that. My first question
4 would be back at the time of the EAS case that we had,
5 and I don't know how well you recollect that time, but do
6 you recall how much toll revenue that U S WEST stood to
7 lose in establishing the EAS routes?
8 A I don't know exactly. A number like
9 $12 million is in the ball park.
10 Q Okay; so approximately in the $12-12.5
11 million range. Do you recollect how much revenue
12 U S WEST was paying out in revenue sharing on this last
13 year of revenue sharing?
14 A Seven million, give or take a million, I
15 think.
16 Q Okay; so then if you look at that, could
17 you in calculating that say the net effect would be a
18 loss of about 4 or 5 million to U S WEST; is that
19 reasonable to look at it that way?
20 A That follows from your logic. It treats
21 lost toll as a cost and it really isn't quite a cost. It
22 is not a cost in the same way that the costs that we've
23 put into the pro forma adjustment and have used to
24 generate that $1.35, yes.
25 Q But just looking at it in kind of a simple
2289
CSB REPORTING EASTLAKE (Com)
Wilder, Idaho 83676 Staff
1 analysis or transaction, you've got a company that's
2 going to lose 12 million or $12.5 million worth of
3 revenue; however, they're not going to have to pay out
4 7.5 million, so the net effect could be 4 or $5 million?
5 A Your logic sounds okay to me.
6 Q So under that, if you were to divide the
7 number of customers, you would come up with
8 approximately, if you're saying $4 million is a $1.00,
9 you're going to come up with about a $1.15, $1.25 or
10 $.30; is that correct?
11 A A number in the same ball park that we got
12 here, yes.
13 Q When you started putting together your
14 basic rate here that you've arrived at, did you start
15 from the ground level or zero and build up to it or did
16 you start at the current level the rates are at and make
17 adjustments one way or the other on the different
18 categories and arrive at your number?
19 A It's a bit of a mix of the two. The
20 numbers that show on this spreadsheet do start with the
21 EAS adder, the net EAS adder, from that EAS case added to
22 the $12.00 1FR rate. My original modeling of this, I
23 started with the $12.00 rate and the EAS coming into the
24 middle of this has caused some difficulties in modeling.
25 I'd point out that they are technical difficulties. We
2290
CSB REPORTING EASTLAKE (Com)
Wilder, Idaho 83676 Staff
1 get to the same answer whether you start with $12.00 and
2 pro form the EAS costs but not the EAS revenue and solve
3 for a revenue requirement.
4 The numerical value of the revenue
5 requirement that's at the bottom of our revenue revised
6 page 101 changes by about $10 million, changes by the
7 amount of that EAS revenue that has been imputed and is
8 now part of the calculation, so since we've added the EAS
9 revenues and the costs into our determination of revenue
10 requirement, we need to add that EAS adder that was
11 modeled into the calculation of the revenue spread, so my
12 numbers here are based on the original $12.00 rate with
13 the 3.62 adder on top of it and we get to the same
14 place. I don't have any doubts that we do. I've proved
15 that to myself.
16 Q So in this particular rate case, if I
17 understand you correctly, do you feel -- let me ask you
18 this: Do you feel that all rates, the different rates,
19 are an issue in this case, that they all have to be
20 justified individually, like EAS, you could take
21 depreciation, so forth, each area as you built your
22 rates, did you look at each one separate and justify
23 that?
24 A You mean the 1FR and the 1FB?
25 Q Uh-huh.
2291
CSB REPORTING EASTLAKE (Com)
Wilder, Idaho 83676 Staff
1 A At this point I have not done that. I
2 have, I think, for administrative convenience and for the
3 reason that I think these rates are going to change
4 fairly soon preferred to just mirror the existing rate
5 structure.
6 Q One last question I've got and I guess it's
7 something that's kind of maybe I'm trying to get clear in
8 my mind on from the very first, but do you think that the
9 different items of settlement agreed to by the Staff and
10 U S WEST can be justified on an item-by-item basis?
11 A Well, I think they're not meant to be
12 justified on an item-by-item basis. I don't think
13 settlements work that way. It is a package and the
14 package has some give and take. There are items where,
15 and I'm sure the Company would say the same thing, where
16 they've gotten more rather than less and there's areas
17 where Staff figures it's gotten more rather than less and
18 the deal rises or falls as a whole, as it were, and
19 that's typical of negotiations anywhere, I think. It's
20 not any individual -- individual items cannot be pulled
21 out without destroying the whole thing.
22 COMMISSIONER HANSEN: That's all the
23 questions I had.
24 COMMISSIONER NELSON: I had one more
25 question based on looking at Exhibit 164.
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1 EXAMINATION
2
3 BY COMMISSIONER NELSON:
4 Q I thought I heard today that it would take
5 a big change in the residential rate to make any real
6 difference in the business rate, and yet, when I look at
7 the number of customers, 1FR and 1FB, it looks like
8 there's about 270,000 residential customers and about
9 50,000 business customers.
10 A That's correct, 1FR versus 1FB.
11 Q So wouldn't a $1.00 change in the rates for
12 residence up be a $5.00 change in rates for businesses
13 down?
14 A It would or if you --
15 Q If you were inclined that way?
16 A Uh-huh.
17 COMMISSIONER NELSON: Okay, thanks.
18
19 EXAMINATION
20
21 BY COMMISSIONER SMITH:
22 Q Mr. Eastlake, could you tell me what the
23 current tariffed rate for non-list and non-pub is?
24 A $4.50 a month, I believe.
25 Q Are those two separate services?
2293
CSB REPORTING EASTLAKE (Com)
Wilder, Idaho 83676 Staff
1 A They are two separate services and I
2 believe that's in my direct testimony. That's not a
3 number that I carry around in my head. Let me find it.
4 Currently U S WEST charges 2.50 for non-listed and $4.00
5 for non-pub.
6 Q And originally, then, you thought these
7 were too high?
8 A I thought there was no cost justification
9 for them, and the reason that I backed off from
10 recommending that they be put down to -- I had originally
11 taken an average of rates for those services across the
12 14 states in the U S WEST area, each of which is a buck
13 or a buck-and-a-half smaller than the Idaho rates, but
14 that decline in the monthly charges that I had
15 recommended was about, would cause about a half million
16 dollar cut in the revenue U S WEST was receiving from
17 privacy services and that half million dollars would have
18 to be spread to the rest of the customers and --
19 Q That's annually?
20 A Annually, yes -- and on reconsideration,
21 with a little help from the Company, I decided that was a
22 big number to hoist on everyone else.
23 Q What's the policy justification you see
24 that we can tell customers who have a problem with this,
25 because we have received comments from a number of
2294
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Wilder, Idaho 83676 Staff
1 customers saying this is a ridiculous price compared to
2 either what I pay elsewhere or compared to the efforts on
3 the part of the Company to provide me this service?
4 A The only way I know to solve that would be
5 to reconsider the entire rate structure from the bottom
6 looking at each and every one of those additional
7 services and reconstruct the entire revenue requirement
8 with some of those services more closely related to
9 costs.
10 Q Are there other services? I guess I'm not
11 sure what other services you're thinking of. I thought
12 we were down to a pretty small list.
13 A Well, the number of dollars that you see on
14 this modeling, for instance, are only a portion, but they
15 may be something over 90 percent, of U S WEST's local
16 revenues, but the things that aren't changing don't show
17 up here and they include a lot of non-recurring charges,
18 installation charges and things like that as well as
19 rates for pub and non-pub and for services I couldn't
20 begin to mention, so those ones that don't change haven't
21 shown up here not under consideration. In order to
22 change pub/non-pub down to something that we thought it
23 was more justified by cost, we would have to shift that
24 burden elsewhere.
25 Q Let me tell you my problem. My basic
2295
CSB REPORTING EASTLAKE (Com)
Wilder, Idaho 83676 Staff
1 problem is maybe I've been here too long and I recall
2 when these rates were set and I recall the reason for
3 them which was given that to the extent that people chose
4 to keep their names out of the directory and to the
5 extent that directory assistance was then something you
6 could do and not be charged that these people were
7 imposing costs on the Company that were being recovered
8 from the general body of ratepayers at large, that is,
9 directory assistance charges, so there was a tie here,
10 thinking we're going to charge these people more because
11 if they choose not to be in the directory, everybody else
12 is going to be paying more for DA because there's going
13 to be more DA calls.
14 Well, somehow over the years DA has gone
15 the way of Title 62 and as we know now, it costs a
16 significant amount to call DA and there's no, you know,
17 so many free calls and so it looks to me like the Company
18 now is making more money than ever from DA and they're
19 still making this much from non-list/non-pub and I'm
20 wondering is it still fair or what's the reason to keep
21 extracting money from this service.
22 A Well, I agree with everything you've said,
23 but the policy decision is whether to right that wrong
24 will take 500,000 bucks away from the Company and that
25 needs to go somewhere else and when I look at the number
2296
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Wilder, Idaho 83676 Staff
1 of customers who have these services, I think maybe
2 whether it continues to be cost justified or not, I'd
3 perhaps rather let them pay it.
4 Q How many customers have these services?
5 A I don't have that available.
6 Q Do you want me to ask the Company that?
7 A 5,000? I don't know.
8 Q I can ask their witnesses. They're going
9 to have some more witnesses next week.
10 A I don't know that number off the top of my
11 head. I can find it for you in a minute.
12 Q And I suppose the other consideration ought
13 to be, if we lower the price, how many more customers
14 will there be.
15 A That would be a consideration.
16 Q My other question is looking at your
17 Exhibit 151 and recognizing that it was built on the
18 Staff's suggested revenue requirement, my question is if
19 it turns out that the revenue requirement found by the
20 Commission to be appropriate is closer to the U S WEST
21 number than the Staff number, what would your rate spread
22 look like?
23 A Given an upward movement, I would insist
24 even more strongly than I have in this case or even more
25 strongly than I have today that it's not appropriate to
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1 reduce the business-residence ratio. I mean, the
2 original case filed by the Company, 96, 97 percent of the
3 total revenue requirement they were asking for, increase
4 that they were asking for, would go to residential
5 customers with a large increase and that struck me as
6 unfair to put virtually all the burden on residential
7 customers, so going in an upward direction, I think I'm
8 more weary about changing the bus.-res. ratio, but I
9 would look much harder at ITAP and some of the other
10 relationships if we were going in an upward direction
11 than in a downward direction. The frank answer, I can't
12 tell you exactly how, but --
13 Q What do you mean look harder at the --
14 A Well, I think going in a downward
15 direction, we've got sort of a win-win situation for
16 everybody and it's not worth lots of trouble to decide
17 who wins a little more than others, but if we're going up
18 by a large amount, I'd put a lot more attention into
19 whether we're disadvantaging certain groups and it
20 requires, I think, a lot more just policy judgment. At
21 this point, the thing has been pretty much a mechanical
22 calculation.
23 COMMISSIONER SMITH: All right.
24 Redirect?
25 MS. HAMLIN: I have no redirect.
2298
CSB REPORTING EASTLAKE (Com)
Wilder, Idaho 83676 Staff
1 COMMISSIONER SMITH: Thank you for your
2 help, Mr. Eastlake.
3 (The witness left the stand.)
4 COMMISSIONER SMITH: Now we're done?
5 MS. HOBSON: Now we're done.
6 COMMISSIONER SMITH: Why don't we plan to
7 start in the morning at about 9:15.
8 (The Hearing recessed at 2:40 p.m.)
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2299
CSB REPORTING COLLOQUY
Wilder, Idaho 83676