20180329Oregon-Idaho Utilities Report.pdf

GtvENS PunsLEY.,,
Attorneys and Counselors at Law
601 W. Bonnock Street
PO Box2720
Boise, lD 83701
Telephone: 20&388-l 200
Focsimile: 208-388-l 300
Gory G. Allen
Peler G. Borton
Christopher J. Beeson
Joson J. Blokley
Clint R. Bolinder
Jeff W. Bower
Preston N. Corter
Jeremy C. Chou
Williom C. Cole
Michoel C. Creomer
Amber N. Dino
Brodley J. Dixon
Thomos E. Dvorok
Jeffrey C. Feredoy
Mortin C. Hendrickson
Brion J. Holleron
Kenli H. Kennedy
Neol A. Koskello
Deboro K. Krislensen
Michoel P. Lowrence
Frqnklin G. Lee
Dovid R. Lombordi
Kimberly D. Moloney
Kenneth R. McClure
Kelly Greene McConnell
Alex P. McLoughlin
Melodie A. McQuode
Christopher H. Meyer
L. Edword Miller
Potrick J. Miller
Judson B. Montgomery
Deboroh E. Nelson
W. Hugh O'Riordon, LL.M.
ww.givenspursley.com
Rondoll A. Petermon
Jock W. Relf
Michoel O. Roe
Jomie Coplon Smilh
P. Mork lhompson
leffrey A. Won
Robert B. Whiie
Michoel C.Creomer
[e-mail]
208-38€.-1247
Don E. Knickrehm, of counsel
Angelo M. Reed, of counsel
Kenneth L. PuBley 1r940-20r5)
Jomes A. Mcclure (1924-2or t)
Roymond D. Givens 1t917-2oo8l
March 29,2018
VIA HAND DELIVERY E
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N)cr\
Diane Hanian, Secretary
Idaho Public Utilities Commission
472W Washington St
Boise ID 83702
-i. I'-1 ,
rll; .. .
=.- **
g()Re: GNR-U-L8-01 - Oregon-Idaho Utilities, Inc.
Dear Diane:
Enclosed please find an original and seven copies of Oregon-ldaho Utilities, Inc.'s
("OIU") submission of Report and Request for Exemption filed pursuant to Commission Order
No. 33965 in the above-captioned case.
Also enclosed is a CD containing OIU's Exhibit 1 containing information asserted to be
protected by law from public inspection, examination or copying as a trade secret and/or
confidential information protected pursuant to Idaho Code 9-340D(1)A)-(B) and Commission
Rule 67.
Sincerely
C. Creamer
Enclosures
cc Doug Musgrave, Oregon-ldaho Utilities, Inc. (w/encls)
Michael C. Creamer [ISB No.4030]
GIVENS PURSLEY IIP
601 West Bannock Street
P.O.Box2720
Boise, Idaho 83701-2720
Office: [phone]
Fax: [phone]
www.givenspursley. celn
IN THE MATTER OF THE
INVESTIGATION OF FEDERAL TAX
CODE REVISIONS ON UTILITY COSTS
AND RATEMAKIKNG
RECEIVEL)
Z0l0 HriR 29 Pt, I: 25
:nAiiff rilELtriTti..trlIs coi,th{t SION
\tq
Attorneys for Applicant Oregon-Idaho Utilities, Inc
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. GNR-U-18-01
OnncoN-IDAHo Urrltrrrs, INC.' s
SururssroN oF REPoRT AND Rreursr
rOR EXEMPTION
Oregon-Idaho Utilities, Inc. ("OIU"), pursuant to Order No. 33965 of the Idaho Public
Utilities Commission ("Commission") hereby submits its preliminary analysis of tax impacts of
the Tax Cuts and Jobs Act of 2017 ("2017 Tax Act") on OIU's tax expenses and net Idaho
operating revenue. In light of the de minimus total effect of the 2017 Tax Act on OIU's Idaho-
separated expenses, and for the additional reasons set forth below, OIU respectfully requests that
the Commission exempt OIU from developing, submitting or instituting a change in rates for its
Idaho customers and from further proceedings in this docket. In support of this Application,
OIU represents as follows:
I. BACKGROUND
l. OIU is a privately owned, independent, local exchange carrier serving remote,
rural customers in southeast Oregon and southwest Idaho. OIU is a "telephone corporation"
OnncoN-IDAHo Utrr,nIns, Ixc.'s SunvrrssroN
OF REPORT AND REQUEST FOR EXBVTPTTON
Page I of7
providing telecommunication services for compensation within the State of Idaho and is subject
to the jurisdiction of the Commission under Titles 61 and 62,Idaho Code. OIU's Oregon and
Idaho exchanges are included within a single study area code 532390. OIU has Eligible
Telecommunications Carrier ("ETC") status in both jurisdictions.
2. OIU's Idaho service territory encompasses the South Mountain Exchange, which,
along with three exchanges in southeast Oregon, were acquired from Contel of the West in
1990. OIU currently serves 73 total access lines in the South Mountain Exchange, of which 5l
are residential lines and 22 are business lines.
3. OIU's 2017 intrastate operating revenue attributable to regulated telephone
service in Idaho was $154,906.
4. The South Mountain Exchange covers 2,126 square miles and represents some of
the hardest-to-serve customer locations in the study area. Approximately one-third of OIUs
Idaho customers have no access to commercial power, rely on gas lamps, lanterns and/or low-
grade solar power for lighting and obtain heat via wood or oil burning stoves.
5. OIU receives federal high-cost support for its Idaho service territory but does not
participate in the Idaho Universal Service Fund ("IUSF").
6. OIU currently has 143.3 miles of cable facilities in Idaho, of which 29.1 miles are
fiber optic and 114.2 miles are metallic. Since OIU's operations in Oregon and Idaho are
closely related, certain facilities within the company are used to provide service to customers in
both states.
7 . In October of 2014, the Commission issued Order No. 33158, which authorized
OIU to increase its rates for monthly residential service incrementally over a four-year period
OnrcoN-IDAHo Utu,nms, INc.'s SunvussroN
OF REPoRT AND REQUEST FOR ExunTpuON
Page2 of7
from $ I 5 .77 to OIU's current rate of $20.00 per month effective as of June 2017 . This rate
increase was approved to allow OIU to maintain its eligibility to receive federal CAF support
under the Federal Communications Commission's Connect America Fund - Phase II Order.l
8. By its Order in the above-captioned docket, the Commission has directed rate-
regulated Idaho utilities to file, among other things, revised tariffs to reflect the changes in
revenue requirement attributable to the 2017 Tax Act. The Order exempted small water
companies with less than 200 customers and Atlanta Power Company, which seryes less than
100 customers in Atlanta, Idaho, from this filing requirement.
9. Provisions of the 2017 Tax Act relevant to the instant docket are a reduction in
the corporate tax rate from 35% to 21o/o and revised treatment of a company's deferred taxes.
10. Because of its limited number of Idaho customers and plant, OIU historically has
allocated its study area costs based on the relative number of access lines in Oregon and in Idaho.
This has produced an approximately 90/10 allocation between the Oregon and Idaho jurisdictions
as indicated in OIU's annual reports filed with the Commission.
I l. OIU has performed a preliminary 2017 eamings analysis for its Idaho operations
using the above 90110 allocation, which is submitted under confidential cover as Exhibit l. Final
separated numbers for 2017 will not be available to apply to this earnings analysis until August
or early September of the current year. Exhibit 2, filed herewith, is Schedule I-1 from OIU's
Oregon Form O showing the company's operating revenues and expenses for 2017.
12. Exhibit 1 shows total Idaho intrastate revenues of $ 105,906 and net operating
income of $12,973. Attributingl0% of OIU's expenses as reported in OIU's Oregon Form O
I USF/ICC Transformation Order Connect America Fund; National Broadband Plan for Our Future, et
seq., Report and Order and Further Notice of Proposed Rulemaking,26FCC Rcd 17663 (2011).
OnncoN-IDAHo Utu-mIrs, INc.'s SunlrrssroN
oF REpoRT AND REeUEST FoR ExruprroN
Page 3 of7
and separation factors used in OIU's Oregon Form I, produces an estimated increase of $2,519 in
net operating income attributable to the reduced corporate tax rate. OIU's estimated one-time
deferred tax benefit per the 2017 Tax Act is $3,890. The total estimated tax benefit for OIU's
Idaho operations is $6,409, of which $3890 has been accounted for 2017 tax purposes, and the
$2,519 estimated tax benefit will be determined and accounted for in OIU's 2018 tax-year filing
in April 2019 with the benefit of actual separated numbers to apply.
REQUEST FOR EXEMPTION
13. OIU respectfully submits that it should not be required to change its current rates
to account for an approximately $6,409 reduction in OIU's 2018 federal tax obligation. Order
33965 indicates that this docket and its filing requirements were intended "to protect utility
customers against paylng unreasonably high rates."2 OIU's current residential rate of $20.00,
which the Commission authorized in20l4 to allow OIU to maintain eligibility for federal CAF
support, is still less than the 2017 Statewide Weighted Average Rate of $21.83.3 OIU submits
that its customers would not be paylng unreasonably high rates if OIU were to maintain its rates
as currently authorized.
14. A reduction in OIU's rates could adversely affect OIU's continued eligibility for
CAF support. As indicated in Exhibit 1, this support represents a significant component of
OIU's operating revenue. If OIU's eligibility to receive this support is adversely affected by
lowering its rates, then OIU could be required in turn to increase its rates to attempt to recover
some or all of this lost revenue source.
2 In the Matter of the Investigation into the Impact of Federal Tax Code Revisions on Utility Costs and
Ratemaking, Case No. GNR-U- I 8-01 , Order 33965 (January 11 , 2018) at I .
OnrcoN-IDArro UtIt mtns, Ixc.'s SusNlrssrox
oF REpoRT AND REQUEST FoR ExnvrprroN
Page 4 of 7
15. Moreover, the lion's share of the tax benefit ($3,890) is one-time reduction in
OIU's deferred tax liability. Any continuing benefit attributable to the reduced corporate tax rate
is expected to be approximately $2,500 annually based on20l7 company revenues and expenses,
and current customer numbers.
16. The tax benefit to OIU's Idaho operations is de minimas in any case and likely
will be consumed by increased Idaho-allocated expenses incurred in computing appropriate rate
changes, preparing and filing tariff amendments, providing notice to customers and revising
OIU's billing protocols as between Oregon and Idaho customers. OIU also anticipates this likely
would create confusion for its Idaho customers.
17. Although Commission Order 33965 exempted small water companies with less
than 200 customers and the small electric utility Atlanta Power from the filing requirements, the
Order did not include the rationale for these exemptions. OIU assumes, however, that their small
customer base, their relatively small annual revenues and resulting small tax benefits, together
with the limited room small companies have to move their rates \p ordown, may have been
factors in the decision to exempt them.
18. If so, OIU submits that these same factors are applicable to its Idaho operations,
and therefore, OIU appropriately should be exempted. If, however, the reasons for exempting
small water companies and Atlanta Power do not apply to OIU and the Commission determines
OIU should not be exempted, OIU respectfully requests that it be granted additional time to
perform any required rate modification analysis and proposed tariffs with the benefit of final
separated numbers for its Idaho operations.
3 In the Matter of the Annual Revision of the Universal Service Fund Surcharges to Become Effective
September l, 2017, Order 33851, Case No. GNR-T-17-04 (August 22,2017) at3.
OnrcoN-IDAHo Urtlttlns, INc.'s SunmrssroN
oF REpoRT AND REeUEST FoR ExrurprtoN
Page 5 of7
19. Communications and service of pleadings regarding this Submission and Request
for Exemption should be sent to:
Doug Musgrave
Oregon-Idaho Utilities, Inc.
P.O. Box 1880
Nampa,ID 83653
[e-mail]
Michael C. Creamer
Givens Pursley LLP
601 W. Bannock St.
Boise, ID 83702
krm@ givenspursley. com
mcc@ givenspursley. com
For the reasons presented above, OIU respectfully requests that the Commission issue an
order exempting OIU from further obligations under Order 33965 and from future proceedings
thereunder. If OIU is not granted the requested exemption, OIU respectfully requests that the
Commission order that OIU shall have additional time to prepare and submit proposed tariff
revlstons.
J1^
Respectfu lly submitte d this fuf,ay o f M arch, 20 I 8.
C. Creamer
GIVENS PURSLEY rr-p
Attorneys for Oregon-Idaho Utilities, Inc.
OnrGoN-IDAHo Uttt tuns, INc.'s Surnalsslou
or Rnponr AND REeuEsr FoR ExEvrprroN
Page 6 of7
Crnrrrrc.lTE oF SnRvIcr
I HEREBY CERTIFY that on the \f%ay of Marc h,2078, the foregoing was filed,
served, and copied as follows:
DOCUMENT FILED:
Idaho Public Utilities Commission
ATTN: Diane Hanian
472W. Washington
PO Box 83720
Boise, lD 83720-0074
U. S. Mail
Hand Delivered
Overnight Mail
Facsimile
E-mail
COPIES TO
Doug Musgrave
Oregon-Idaho Utilities, Inc.
P.O. Box 1880
Nampa, ID 83653
dou g.mus [e-mail]
xrtrnx
U. S. Mail
Hand Delivered
Overnight Mail
Facsimile
E-mail
Mi C. Creamer
OnrcoN-IDAHo Urrlnms, INC.'s Sururssrox
oF REpoRT AND REeuEsr FoR ExBruprrox
PageT of7
EXHIBIT 1
Submitted under "Confidential" Cover as exempt from
public inspection, examination or copying pursuant to Idaho
Code 9-340D(1)A)-(B) and Commission Rule 67
OREGON.IDAHO UTILITIES, INC.
CASE NO. GNR.U.18-01
PRELIMINARY 2017 EARNINGS ANALYSIS FOR ITS IDAHO OPERATIONS
EXHIBIT 2
OREGON-IDAHO UTILITIES, INC.
CASE NO. GNR-U-18.01
SCHEDULE I-1 FROM OIU'S OREGON FORM O
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