19920416.docx

Minutes of Decision Meeting
April 16, 1992 - 1:30 p.m.
In attendance:
Commissioners Marsha H. Smith, Joe Miller and Ralph Nelson and staff members Mike Gilmore, Birdelle Brown, Eileen Benner, Stephanie Miller, Belinda Anderson, Gary Richardson, Tonya Clark, Don Howell, Dave Schunke, Lynn Anderson and Myrna Walters.  **Also in attendance was Walt Sorg of GTE Northwest.
**The following items were considered at this decision meeting.  Minutes are transcribed from notes taken at the meeting by Myrna Walters, Commission Secretary.
Only item on the agenda was No. 1 - Birdelle Brown's April 15, 1992 Decision Memorandum re:  GTE Advice 92-4 (continued) Restructure Billing and Collection Service.
Commissioner Miller said reviewed the matter.  When it came before the Commissioners originally, he had raised the question of the cost as a way of focusing attention on the cost methodologies for service that have some degree of competition and as a way for commissioners to think about whether or not we want to pay careful attention to that question - the specific issue being that presumably we want to be sure fully-regulated services aren't subsidizing others.  Have we ever decided whether anti-competitive prices of service, are below some measure of cost and what that standard is, even though we have not focused a lot of attention to that?  There is the requirement of the Telecommunications Act that there not be cross-subsidization.  This filing happened to come along and thought it was an opportunity to focus on this service.   Don't want to suggest that this tariff advice is where we make any broad policy.  Would think it was an opportunity to get some attention on that topic.  That is why Birdelle Brown was asked to look into it a little further.  Had a couple of questions; primary one being the mention on the top of page 2 that we still cannot be sure that the company will recover their costs.  From where it stands now, do we or don't we know - or what do we know?
Birdelle Brown replied she didn't know if she ever got where Commissioner Miller wanted her to go.  Madonna Faunce helped her.  Asked company for backup for cost figures.  When they submitted it it included an error and it actually was only going to be a small amount of revenue.  They may not recover their costs.  It is based on 1990 volumes put into this model.  Don't project any growth.  Company was not able to give us any more recent information.  Couldn't say that they are going to recover costs.  Would like to think they are.
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Commissioner Miller said the cost methodology is some fully-submitted, or how would it be characterized?
Birdelle Brown said Madonna Faunce spoon-fed her the wording on cost.  She was not comfortable with the term "fully embedded".
Commissioner Nelson said embedded would include depreciation.
Commissioner Miller asked what "fully loaded" meant?
Birdelle Brown said it was a phrase Madonna Faunce used.  Explained what it included.  They did not include administrative salaries, property taxes, no rental, no building depreciation.  To her it is somewhere between direct and indirect costs.
Madonna Faunce explained.  They have identified some accounts that have costs in them.  Explained what it included (what costs).  There would not be any depreciation costs on the computers, no rate of return in those or anything like that.  You are only looking at the accounts that have costs associated with those functions.
Commissioner Nelson asked if they quit offering the service, would it reduce the cost?
Madonna Faunce said it depends on what they would do with the people (employees).
Don Howell said part of it is the company's focus.  Quoted from the letter.  Think they are looking at it as market sharing.
Walt Sorg of GTE said - to the question of what is in the costs - it was determined company would use the direct cost of the function.  This is directly allocated.
Why this tariff?  Believe that of its direct costs, most are fixed.  If company were to lose the capacity to bill, those costs would probably be born anyway by the company.  The modification of the tariff is that we are trying to make sure we can preserve this function.  They are largely fixed costs.
Eileen Benner said it appears all the costs are labor intensive costs so if they were not busy performing this service, they would perform this service for interstate billing and collection so the time on the state side there
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they might have to get rid of one or more people or their services would be picked up in other accounts.  In the other breakdown of costs, they said the interstate costs were over a million dollars, 2.7 was the total.  Of that intrastate interlata was $173,000.  It is a fairly small percentage of overall costs that are allocated to intrastate.  It would seem they are not going to lay a lot of people off.  The cost associated with this service is small in light of other services.
Commissioner Nelson asked Eileen Benner what her position was?
Eileen Benner said if they got rid of it there would be more costs shifted to the interstate side.
Birdelle Brown said this is a modification of what they have.
Commissioner Smith said the changes they are proposing result in loss of $43,000.
**It is now almost $54,000.
Don Howell said they still show a net increase.
Madonna Faunce said with the new numbers for expenses and revenues, looked like it would be a breakeven on those expenses and not cover any of the administrative or depreciation or rate of return.
Eileen Benner said these are only direct incremental costs that are being recovered.
Birdelle Brown said she thinks part of their theory might be that increased volume should result in increased revenue.  Would not like to have them come back in a rate case and say we are losing money for this service.
Madonna Faunce said in a rate case, would have to see if it is making a profit, if not, company would have to eat any losses rather than shift burden on the ratepayers.  That would not address the concern of anti-competitive.
Commissioner Smith said she would hate to use this service as a vehicle to make that decision.
Commissioner Miller said he thought this was an opportunity to have staff actually dig into this.  There are tests.  One for cross-subsidy is avoided cost test.  Figure
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out every cost that would be avoided ... that is the standard to use.  That of course usually results in higher costs to be recovered.
Birdelle Brown said if we look at it just based on what they gave us, it is going to recover considerably less money.
Lynn Anderson said if the company can do more billing and collecting, will recover more costs.  Some of us don't care if it is anti-competitive.
Commissioner Miller said he didn't want to do it here.  Do want to say in his opinion we should do more work on these questions.  Asked if he got the impression that in terms of understanding this particular deal, wouldn't a lot more information ever be available?
Birdelle Brown said - could look at 1991 costs - could get 1992 budget.
Suggested having company report back at the end of the year.
Commissioner Miller said his vote would be to approve the tariff on the grounds that any impacts are likely to be minimal because the numbers are so small and only on the other condition that we think of someway to advance our collective thinking on this and not just do this and forget it.  Want to keep moving on it.
Walt Sorg said he looked back at a prior order when it was decided it was more appropriate to detariff.  What we have really done is detariffed, it has never been addressed.
This is a detariffed service.
The 61-62 circumstance is not a question.
Don Howell said if they were to price these below costs, it is a concern.
Commissioner Smith said we have never done cost of service for GTE so we don't know what anything costs.  In the telephone regulation, no one has ever wanted to know what it costs.  It has deliberately not been done.  Telephone rates have not been done the same way as electric and gas.  think what we are doing is looking at the can and there are a lot of worms.
Commissioner Miller said when you do that you give up ability to have any vote of anti-competitive pricing enforcement.
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Don Howell said GTE is a fully regulated Title 61 company - not with U. S. West that is split.
Commissioner Smith said this gets back to allocation of joint costs.  Said her guess as to what something costs is just as good as anyone elses.  Think we will eventually get there for telephone companies but know she will have trouble being comfortable with that.
Commissioner Nelson said he would approve the tariff.  Think they would have priced it differently had they seen the error sooner.
COmmissioner Smith said she thought the company has pretty good sense we are worried about things like these.
Commissioner Miller said he thought Commission needed expertise on costing.
Meeting adjourned at 2:10.
Dated at Boise, Idaho, this 2nd day of June, 1992.
Myrna J. Walters
COmmission Secretary
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