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Home My WebLink About20030324_412.pdfDECISION MEMORANDUM TO:COMMISSIONER KJELLANDER COMMISSIONER SMITH COMMISSIONER HANSEN COMMISSION SECRETARY COMMISSION STAFF LEGAL WORKING FILE FROM:BIRDELLE BROWN DATE:MARCH 20, 2003 RE:2002 ANNUAL REPORT AND RECOMMENDATIONS FOR THE IDAHO TELEPHONE SERVICE ASSISTANCE PROGRAM The Idaho Telephone Service Assistance Program (ITSAP) Administrator, Alyson Anderson, filed the ITSAP Annual Report for the fiscal year ending December 31 , 2002. Ms. Anderson reported gross revenues from surcharges of$1 243 775 of which $743 229 (60%) was assessed on local exchange services and $500 568 (40%) was assessed on wireless/cellular service. Disbursements included credits to eligible subscribers of $1,159 039 and phone company administration costs of$99 275. The Administrator s fees were $8 134 for the year. The fund's cash balance at the end of the year was $18 371. The average number of residential local access lines for the year remained nearly constant at 504,459 while average business local access lines increased about 3% to 200 910. Average wireless access lines increased about 24% to 488 629. The average total number of lines increased overall about 93 000 lines or 8% to 1 193 997. The average number of credit recipients increased nearly 3 000 (12%) to 27 557 and received $1 159 039 in assistance, an increase of$120 925 (12%) from last year. Administrative costs reported by the telephone companies also increased 12% to $99 275 for the year. The current surcharge of$0.10 per line was established effective July 1 , 2002, and was an increase from $0.08 per line established in February 2002. Ms. Anderson reports "the ITSAP continues to struggle with cash flow and the ability to reimburse companies for the credits provided." She reported the cash balance at February 28 2003 as being only $87. DECISION MEMORANDUM - 1 -MARCH 20, 2003 Ms. Anderson provided four funding options for the Commission to consider for the coming year. Copies are attached. Three of them assumed that the 12% growth in recipients of the fund would continue, as would the increase in telephone company administrative expenses. She also included $5 000 for the audit that is required. She then considered surcharge rates of $0.10 per line (resulting in a projected year-end balance of$20 712), $0.11 per line (resulting in a projected balance of $163 864) and $0.12 per line (resulting in a projected balance of $307 016). Ms. Anderson recommended the increase to $0.12 per local and wireless access line saying "it is necessary for the ITSAP to carry a larger cash balance due to the difficulty in predicting surcharge revenue and disbursements from the fund. STAFF RECOMMENDATION Staff agrees with Ms. Anderson that an increase is warranted. The Administrator and Staffhave attempted to conservatively predict revenue and expenses, but we have seldom been able to adequately predict the growth of recipients. While wireless lines have also increased, the associated revenue increase is not enough to fund the increased expenses for assistance and associated administrative expenses. Staff believes the fund needs to maintain a three to four month working balance and recommends that Ms. Anderson s requested increase to $0.12 be approved. c orresp/ d me mos/2 00 3 / i tsap2 00 2 DECISION MEMORANDUM - 2-MARCH 20, 2003 ADMINISTRATOR'S REPORT IDAHO TELECOMMUNICATIONS SERVICE ASSISTANCE PROGRAM YEAR ENDED - DECEMBER 31 , 2002 SURCHARGE REVENUES The Idaho Telecommunications Service Assistance Program (ITSAP) surcharge is assessed on all residential, business , and wireless end users not receiving the ITSAP credit. Gross surcharge revenues reported by companies for the year totaled $1 243 775 , of which $743 229 (60%) was assessed on local exchange services and $500 568 (40%) was assessed on wireless/cellular services. Most companies actually remit net surcharge revenue, which is gross surcharge revenue less any assistance credits provided to eligible customers and the company s administrative costs. Net surcharge revenue actually collected from telephone companies for the year ended December) 31 , 2002 totaled $460 184. DISBURSEMENTS ASSISTANCE CREDITS/COMPANY ADMINISTRATIVE EXPENSES Telecommunications companies reported $1 159 039 in credits provided to eligible subscribers and $99 275 in costs of administrating the program for the year ended December 31 , 2002. Net surcharge revenues reported by companies for the year totaled ($14 540). ADMINISTRATIVE FEES AND EXPENSES Fees and expenses paid the Administrator during the year ended December 31 2002 were 134. These expenses include bank charges of $390. INVESTMENTS AND FUNDS CASH At December 31 2002, the Idaho Telecommunications Service Assistance Program had a cash balance of $18 371. The following is a table showing the beginning, ending, and monthly cash balances for the year. During the year ended December 31 2002, ITSAP actually reimbursed companies for net monthly discounts provided to eligible subscribers and costs of administering the program in the amount of $563 934. INTEREST Interest earned on funds during the year ended December 31 2002 was as follows. ADMINISTRATOR'S RECOMMENDATION On June 12 , 2002, the Idaho Public Utilities Commission increased the Idaho Telecommunications Service Assistance Program (ITSAP) surcharge rate to the current $. per access line, effective July 1 , 2002 (Order No. 29056). At the time, we forecasted that the 10 surcharge would provide a year end balance of approximately $203 015. During 2002 , thelocal access lines remained virtually the same, while the wireless access lines increased 24% and the eligible credit recipients increased 12%. The ITSAP continues to struggle with cash flow and the ability to reimburse companies for the credits provided. The cash balance at February 28 , 2003 is only $87. It is necessary for the ITSAP to carry a larger cash balance due to the difficulty in predicting surcharge revenue and disbursements from the fund. I recommend the surcharge be increased to $.12 per local and wireless access line. This will , hopefully, provide an adequate balance and compensate for uncertain conditions. IDAHO TELECOMMUNICATIONS SERVICE ASSISTANCE PROGRAM 2003 FUNDING OPTIONS OPTION 1 - STATUS QUO BANK BALANCE 2/28/03 ANNUAL INVENTORY LOCAL ACCESS WIRELESS ACCESS 708 695 484 239 TOTAL ITSAP FUNDING FOR YEAR ESTIMATED INTEREST INCOME ESTIMATED ITSAP CREDITS ESTIMATED ADMINISTRATIVE EXPENSES TOTAL ESTIMATED EXPENSES PROJECTED INCOME/(DRAWDOWN) PROJECTED BALANCE 1/31/04 OPTION 2 - MAINTAIN SURCHARGE AT $. ADJUST CREDITS AND ADMINISTRATIVE COSTSr..-. BANK BALANCE 2/28/03 ANNUAL INVENTORY LOCAL ACCESS WIRELESS ACCESS 708 695 484 239 TOTAL ITSAP FUNDING FOR YEAR ESTIMATED INTEREST INCOME ESTIMATED ITSAP CREDITS ESTIMATED ADMINISTRATIVE EXPENSES TOTAL ESTIMATED EXPENSES PROJECTED INCOME/(DRAWDOWN) PROJECTED BALANCE 1/31/04 IDAHO TELECOMMUNICATIONS SERVICE ASSISTANCE PROGRAM 2003 FUNDING OPTIONS OPTION 3 - INCREASE SURCHARGE RATE TO $. ADJUST CREDITS AND ADMINISTRATIVE COSTS BANK BALANCE 2/28/03 ANNUAL INVENTORY LOCAL ACCESS WIRELESS ACCESS 708 695 484 239 TOTAL ITSAP FUNDING FOR YEAR ESTIMATED INTEREST INCOME ESTIMATED ITSAP CREDITS ESTIMATED ADMINISTRATIVE EXPENSES TOTAL ESTIMATED EXPENSES PROJECTED INCOME/(DRAWDOWN) PROJECTED BALANCE 1/31/04 OPTION 4 -INCREASE SURCHARGE RATE TO $. ADJUST CREDITS AND ADMINISTRATIVE COSTS BANK BALANCE 2/28/03 ANNUAL INVENTORY LOCAL ACCESS WIRELESS ACCESS 708 695 484 239 TOTAL ITSAP FUNDING FOR YEAR ESTIMATED INTEREST INCOME ESTIMATED ITSAP CREDITS ESTIMATED ADMINISTRATIVE EXPENSES TOTAL ESTIMATED EXPENSES PROJECTED INCOME/(DRAWDOWN) PROJECTED BALANCE 1/31/04