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HomeMy WebLinkAbout19910115.docx Minutes of Decision Meeting January 15, 1991 - 9:30 a.m. In attendance were: Commissioners Joe Miller, Perry Swisher and Ralph Nelson; and staff members Don Howell, Gary Richardson, Syd Lansing, Stephanie Miller, Birdelle Brown, Madonna Faunce, Terri Carlock and Myrna Walters. Also in attendance were Mary Hobson and Jim Wozniak for U. S. West. Items from the January 14, 1991 Agenda that were held for a later date were Items 7 and 10. Topic of this decision meeting was Item 9. 9.  Phase II Revenue Sharing - Case No. MTB-T-90-3 -- Don Howell's Decision Memorandum on this matter. Commissioner Miller said he thought Commission could go through the memo starting with the four changes. 1.  Accruing interest. Don Howell quoted Jim Wozniak from the hearing transcript. Commissioner Miller asked if all Commission really has to decide right now is to accrue interest for 1991? Don Howell said yes. Commissioner Nelson said if interest is accrued - all you have to say is on June 30 of each year they dispurse funds. Agreed to that. 2.  Directory Revenue. Accepted staff and company proposal. 3.  Capping Tech Plus Expenditures. Commissioner Nelson said only thought on the capping where Commission had agrement on the cap dated from 4 years ago, should expense the amount that was in that cap and capitalize the difference.  Don't think the amount of money that is being expended on the program is that different from the estimate.  These are the 2 years where there is a difference.  Have been prety much on target the last 2 years. -2- 1991 is the last year. Don Howell showed the numbers from the transcript. Commissioner Nelson said by accepting the agreed-upon cap for 1991, we don't have much in the record as to why they are spending more and the reasonableness, but don't think it should be questioned here.  There wasn't much to go on anyway.  So guess we would assume the expenditures are correct and we agreed on the cap and that capitalizing above that was the way it should be done. Commissioner Miller said effectiveness of this spans two years. Don Howell said there is some evidence in the record in Syd Lansing's exhibit which is a letter from U. S. West to Don Howell which explains what two items caused the increases.   **Lynn Anderson in attendance at this time. Commissioner Nelson asked what we did on changes to separations earlier? Don Howell said these are all line item adjustments.  Separations comes out on a different line. Commissioner Nelson asked if there was any objection in going with the agreed-upon caps? Commissioner Swisher said not on his part. Commissioner Miller said the overall effect for '91 is not that much. Agreed. 4.  Line Count Adjustment. Company didn't oppose conditions upon the Commission buying the four adjustments and continuing. Commissioner Swisher said he thought striking a compromise was a good way to go on this. Approved. Held on Item 5 at this time. 6. Commissioner Miller said he thought company agreed Syd Lansing's methodology was the simplest way to go. -3- Commissioner Nelson said he thought it would be difficult to go to '87.  Tough to go back and reaudit that far back.   Stephanie Miller said maybe it would be better to decide these new revenues on a case by case basis.  It may be decreased rather than increased. Commissioner Nelson said it might be more prudent to just forget them. Stephanie Miller said we corrected the problems that we could foresee, not having ever seen any of these come back in.  Have no idea if that all that it would take.  Are just  visualizing the changes. Commissioner Miller asked if it would be better to just leave it open and say when and if it occurs, staff can investigate and make recommendations? Stephanie Miller said she would hate to write things down now for the future. Commissioner Nelson said if something comes back from an subsidiary that doesn't make a material change, don't add it to the equation.  Even if there were significant revenue, changes could make it significant.   Commissioner Miller suggested leaving it open for a case by case basis.  As a general rule we will look at materiality of revenue change and will in the absence of some unexpected items, probably treat it the way Syd Lansing recommended but keep our discretion to make a case by case decision. Agreed to by all three commisisoners. Commissioner Miller said those are the decisions we need to make with regard to '91 and Tech Plus for '90.  That brings Commission back to continuation beyond '91. 5. Commissioner Nelson said he thinks if we continue it, should continue it for period of 2 years through '92.  Think in '92 we have a decision to make on what to do with money coming back into revenue sharing from phasing out of Tech Plus.  Whether or not it is significant amount, if we reduced rates, it could affect statewide average.  It would affect other customers.  Think it is something that has to be analyzed. -4- Commissioner Miller said at the end of the Tech Plus program, think we will have a major decision to make. Don Howell said at the end of Tech Plus, you will pump in an additional 3 million dollars.  Tech Plus would have been wiped out. Commissioner Nelson said he thought a deciison should be made before that. Commissioner Miller asked is Commission couldn't make that decision today?  There will be other proposals about what to do with it later. Commissioner Swisher said he thought Commission should not be looking in a reactive way, need to be looking at capital outlay prospects on the system.  You do have enough support out in staff, think Don Oliason has the skills to be back up in Engineering to look at those things.  Suppose someone proposes that there be an orderly retirement of analog systems.  Need to address as categorically as possible all policy questions, the implications of everything happening in the new systems (SS7).  There are major things that need attention.  Upgrades so far have brought us to a stage where the next decision where things are on the horizon, are more specific in their utility to the telephone customer.  So you need to look at where everybody is headed next and not wait for U. S. West to come up with something.  There are things that could be done to the system for economies in the public school system.  Think these policy decisions need some diligence by staff.  Could point out you could handle policy on what issues.  There are other decisionmakers other than Commissioners. Commissioner Miller said at the end of '91 if you accepted audit analysis there is going to be a signaificant overearnings problem to deal with.  Question is going to be do we make some rate adjustment or investment adjustmewnt.  Staff needs to be looking to that question because it is going to be there. Commissioner Swisher said suppose '91 ends and you go to permanent rate reduction, and then the only way you can get into capital expenditures is the hard way by increasing rates on some equally painful procedure? Commissioner Nelson said you are saying other things are staying static and they won't. -5- Commissioner Swisher said there will be some return to nationaL policymaking.  Think the question of who and how you deal with the information services will be resolved to some degree within the next year or year and a quarter. Don Howell said with the development of technology there may be something else other than SS7. Commissioner Nelson said on the last question, do we want to make the observation that the area Mr. Fothergill covered has already been adjusted? Commissioner Miller said he thought some had been done but there were some that adjustments had to be made to. Syd Lansing said when it could be quantified it was adjusted, but the overall accounting system is weak and when it is weak, anything can happen. Commissioner Miller said he thought Commission could observe some adjustments were made.  Don't want to say they are all okay. Commissioner Swisher said that is an on-going relationship between auditors and company.  Can't say in an order, everything is fine. Don Howell said what staff is saying is we would like to work with staff to develop procedures.    Commissioner Miller said getting back to for how long we stretch this out, and the relationship with determination of Tech Plus question, question he wanted to discuss is the question of, is it the intent or the goal of our regulatory system in Idaho to regulate profit?  What do you do about what appears to be overearnings?  The real fundamental question is:  is it our intent or is this system designed to regulate profit? Commissioner Nelson said he thought saying just and reasonable would work from both ends.  We will regulate benefits but in a different manner.  The way we took a look at whether profits are reasonable is through a generic order. Commissioner Miller said he though the thing Commission has to think about is we have different points of view but neither can force us to make a finding of who is right or wrong. -6- Commissioner Nelson said if Syd Lansing's approximate eight million figure had been 11 or 12 million we would have ben faced with a much larger problem.  There would be a greater sharing of revenues.  On the other hand if it had come out at one million dollars and company was underearning, it would have been up to the company to offer something to increase earnings. Commissioner Miller asked Commissioner Nelson if auditing shows some rate of reasonableness is what he is saying? Commissioner Nelson said it is sharing without setting rate of return.  If we were in a cost allocation mode, and earnings were in range.. after audit based on company figures and staff figures that it was between 12 and 13, might opt out of a rate case because of cost of rate case.  If the figure gets out of range or reasonableness, adjustments need to be made. Commissioner Swisher said there were real rate cases in the '80s.  Commissioner Miller's question is where do you go from here?  It is to the credit of the staff and the Commissioners that we haven't bought in on any of the crazes, haven't bought in on crazes, think in a time of growing technologies that there is a trend in the industry to get a cap.  In some states you couldn't get Commission to allow rate of return, it wasn't investment in those states.  You are in pretty good shape in Idaho.  Think it has successfully worked here.  Not sure if it continues in the future (relationship with the company). Commissioner Miller spoke to the "just and reasonable" statute.  Hope it is the Commission's view that we are not giving up adjustments of rates. Commissioner Nelson said he thought with revenue we are operating with a range of reasonableness. Commissioner Swisher said if you commit to '92, if he was in a consumer group, would use '92, first year without Tech Plus, to get a permanent rate reduction.  Think it would be perilous to commit to this forever. Jim Wozniak from U. S. West said he didn't think there was any thought at the company that Commission has waived that right to audit.  Either side can pull the plug on revenue sharing.  After looking at this, Commission can recommend fine-tuning also.  If that doesn't work then there could be rate case.  When you fight those wars there will be constraints.  Seems to him Commission has room to check    -7- things out.  At the same time do the kinds of things that you just did after looking at what staff and company did.  Have already looked at methods to see if they cam be made better. Commissioner Miller said in other contexts was hearing company was using this to come out from under "just" rates. Jim Wozniak responded - company has some authority still in Idaho.  Have people here respected and somewhat left alone.  How this is viewed in Denver may have something to do with power and authority still in Idaho (company). Commissioner Miller said he thought Commission had uanderstanding of that.  Haven't told Don Howell what our decision is on continuation, though.   Commissioner Nelson said he thought we should extend this through '92.  Don't want to go through this every year but a subissue is out there of Tech II which will affect statewide average and look at that at the end of '91.  It would change average revenue base way out.  If there was three million on the table and we reduce rates by a percentage, then you have to get back and massage the base. Don Howell said he thought rate reduction would reduce dollars to company. Commissioner Swisher said think of what happens when legislature reduced taxes. Stephanie Miller said you could do what you want to do with Tech Plus and still have revenue sharing go on.  Don't have to re-examine if you want to continue revenue sharing at the same time. Commissioner Nelson said another option is to find that it is significant enough to use it to affect statewide averaging. Stephanie Miller said those will be fairly important, fairly complex questions, if you could deal with them along, don't have to deal with it along with continuation of revenue sharing.  If you were able to look at it aside from the other issues, it might be cleaner. Commissioner Nelson said he thought Tech Plus money was pretty clear cut issue. -8- Don Howell said if Commission was concerned about quantifying "how long" the plan should go, the company never really said.  If you are looking for language on quantifiable number, could be nonspecific.  There will be accounting all along. Stephanie Miller said it seems to her the acocunting problems and issues are going to be there independent of what we are doing on revenue sharing. Don Howell said it should take less time next time. Commissioner Miller said he didn't know how to phrase it.  On the one hand company should have stability but at the same time, it would not be wise to make it indefinite, ironclad commitment to this or the other method for a long period of time - how do you balance that?  Do you pick a year or aggregate it? Commissioner Nelson said he thought it would continue until either party thinks it isn't working.  Should review it every two years.  Give staff and company something to gear up for. Jim Wozniak said company did not set a definite date.  Could be non-specific and articulate what Commissioner Miller indicated his concerns are.  State that the plan will be reviewed on a periodic basis to understand the underlying numbers being filed with the Commission. Commissioner Miller asked Commissioner Nelson about the every two year review, would he also want an audit? Commissioner Nelson said staff should be independent enough to decide. Stephanie Miller said she would prefer it not be set.  Time certain is not the way to go. Commissioner Nelson said perhaps a date certain was not appropriate after all. Don Howell said he needs to know if the Commission wants a full order now? Commissioner Nelson suggested an interim order that all Commissioners agreed on would be the way go to with the time constraints. Agreed to by all commissioners. -9- Meeting adjourned.         DATED at Boise, Idaho this       day of January, 1991.                           PRESIDENT                           COMMISSIONER                           COMMISSIONER ATTEST:                               Commission Secretary 0016M