20040816_915.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
WORKING FILE
FRorvi:TERRI CARLOCK
DOUG COOLEY
DATE:AUGUST 13, 2004
RE:THE APPLICATION OF RURAL TELEPHONE COMPANY FOR
AUTHORITY TO BORROW FROM THE RURAL UTILITY SERVICE
NOT MORE THAN $17 500,000; CASE NO. RUR-04-
Rural Telephone Company (Rural) requests authority to borrow not more than
$17 500 000 from the Rural Utility Service (RUS). Staff has reviewed Rural's Application and
believes the loan will be used primarily for new growth and upgrades to existing telephone
service through 2008. Of the proposed $17,425 104 loan, approximately $10 649 067 will be
used in Nevada. The remaining $6 776 037 will be used in Idaho. Specifically, Rural'
Application states that the loan proceeds are directed for proj ects such as a new central office
switch and building in the Boise River exchange, replacing copper with fiber optic cable in the
Atlanta exchange, placing fiber from the Prairie central office to the Boise River central office
placing fiber and supporting power in the Shoup exchange, and placing fiber optic cable from the
Three Creek exchange to a connection point with Filer Mutual at Rogerson, Idaho. Rural'
Application also states that the Company will be increasing capacity for the coming ten years of
projected growth and designs new copper loops to be non-loaded and shorter than 18 000 feet.
It appears that the Idaho portion of the loan proceeds will be used primarily for providing
regulated services. However, because equipment such as fiber optic cable and digital switching
electronics can be used for a variety of services, it is difficult to determine what other services
may be provided over such equipment and at what levels without specific review or studies.
DECISION MEMORANDUM - 1 -AUGUST 13, 2004
A portion of the loan may qualify as a hardship loan with the interest rate of 50/0. The
remainder of the loan will be at the current market rate when the advances are made. The capital
structure for Rural Telephone Company at December 31 2003 consists of 48.6% debt and 51.40/0
equity. Unless additional equity is contributed, the capital structure with the full loan advances
of$17 500 000 will consist of approximately 78.7% debt and 21.3% equity. On a system basis
these plant improvements will double the total plant in service.
STAFF RECOMMENDATION
Staff recommends that the Commission approve the RUS loan request of$17 500 000.
Staff also recommends that Rural provide copies of the RUS advance documents and all RUS
compliance reports and calculations.
COMMISSION DECISION
Does the Commission approve the requested RUS loan authorityof$17 500 000?
Does the Commission adopted Staff s recommended reporting requirement?
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JJJl12
Terri Carlock
udmemos/rurtO4.1 tc
DECISION MEMORANDUM - 2-AUGUST 13 2004