20180330Albion Telephone Company Response.pdf

ffi \ttr\r,(,
unications
P2o8-67r-B1s I lzot-|11-Ozoo / [e-mail] I arrswNorthSrAlbion, lDB33r1
March 30, 2018
ldaho Public Utilities Commission
Oflice of the SecrotarvRECEIVED
MAR 3 0 20t8
Diane Hanian, Commission Secretary
ldaho Public Utilities Commission
472W. Washington
P.O. Box 83720
Boise, lD 83720-0074
Boise,ldaho
Re:Case No. GNR-U-18-01
Notice of lnvestigation - Order No. 33964
Dear Ms. Hanian:
On January 17, 2018, the ldaho Public Utilities Commission (the "Commission') issued a
Notice of lnvestigation - Order No. 33964 ("Notice') to investigate the impact of the new federal tax
legislation ("2017 Tax Act") on utility costs and ratemaking. Pursuant to the Notice, each rate-
regulated utility must (a) immediately account for the financial benefits from the January 1, 2018 tax
rate reductionlo2l% as a deferred regulatory liability; and (b) by Friday, March 30, 2018, file a report
with the Commission identifying and quantifying all tax changes individually. The report must disclose
the federal income tax components for the year 2017, and the federal income tax components if the
utility had been subject to the 2017 Tax Act's revisions to the tax code, including the 21% tax rate. ln
addition, each utility's report must include proposed tariff schedules that show the revenue
requirement impacts from the 2017 Tax Act.
The attached worksheets are the response of Albion Telephone Company (hereinafter
"Company"), an S-Corp which is taxable as a pass-thru entity. Based upon conversations with
Commission staff, Company understands the Commission intends to either adjust rates or adjust
Universal Service Fund (USF") distribution amounts based on the single issue of the change in tax
rates. Company understands that the impact of the 2017 Tax Act on Company's revenue requirement
and USF disbursement should be considered in the determination of the Company's rates and USF
disbursements, but Company believes that the Commission should consider all of the relevant
potential impacts to Company's revenue requirement at the same time. Thus, while the Company is
www.atcnet.net
providing the calculations required by the notice, the Company requests that the Commission take no
action at this time with regard to changing rates or adjusting USF distributions until all of the
Company's financial information is complete and the full impact of the changes in the tax rate can be
analyzed, and the Company can fully state its case as to whether rates or USF dishibution amounts
should be adjusted.
As the Commission is aware, public utilities ratemaking requires that all income and expenses
be evaluated to determine a company's revenue requirement. Typically, only after the revenue
requirement has been determined will rates be adjusted. Changes in expenses, such as a reduction
(or increase) in the federal income taxes, would need to be evaluated against a company's revenue
requirement and associated authorized rate of return. Company's revenue requirement was
established decades ago. Company has asked the Commission for a copy of the Company's revenue
requirement calculation prior to submitting this required information, but did not receive such
information. Because Company has no record of the tax rate used in connection with determining
Company's revenue requirement, Company cannot determine if a reduction in the tax rate has any
financial benefit as a deferred regulatory liability. Moreover, without knowing Company's authorized
rate of return as set in Company's last rate case, it is not possible for Company to evaluate whether or
not Company is over-earning or under-earning with the change in the federal tax rate. Until all of the
information can be evaluated, Company is opposed to the Commission adjusting rates or USF
distributions based solely upon the change in the federal tax rate.
Another factor to consider is that while rate of return incumbent local exchange carriers, such
as Company, are regulated public utilities like electricity, gas, and water, the regulated
telecommunications industry in ldaho is different from other public utilities.
ldaho does not set local rates based on Company's costs, it sets the rates for qualifying high-
cost local exchange telephone companies at 125o/o of the statewide weighted average rate. That rate
is currently $27.28 for residential service and $47 .22 for business service. This local rate is
substantially greater than the benchmark local rate established in the Federal Communications
Commission's USF/ICC Transformation Order dated November 18, 2011, below which Company
would receive dollar for dollar reductions in federal High Cost Loop Support. These rates for
telecommunication service were not set based on actual costs, including a gross up for federal income
tax, and should not be reduced based solely on the reduction in the federal tax rate. Also, with the
current uncertainty of the future of the ldaho Universal Service Fund, it would seem imprudent to make
any changes to the distribution levels until the Commission has finalized its findings in Case Number
GNR-T-1 7-05 Review of ldaho Universal Service,
ln addition, Company does not believe that the Commission has authority to reduce
Company's USF funding based solely upon Order No. 33965. "No order altering a telephone
company's funding from the USF will be issued without notice that USF funding is at issue and
appropriate opportunity to be heard in person or in writing." IDAPA 31.46.01.106.04(d). Order No.
33965 made no mention of changes to any telephone company's USF funding. Company did not
know that a reduction in USF funding was at issue until a later conversation with Commission staff.
Based upon what the Company is required to provide to the Commission, Company has not been
given an appropriate opportunity to be heard. The Commission is apparently going to make a change
in USF funding based upon an estimated numerical calculation, using 2017 data that is not fully
subject to the federal tax reform, without taking into consideration all the other issues that go into
setting ratepayer rates and USF funding levels.
Company has not included proposed tariff schedules that show the revenue requirement
impacts from the 2A17 Tax Act. As stated above, because Company does not know what tax rate was
used in determining Company's revenue requirement, Company cannot know the revenue
requirement impacts from the 2017 Tax Act, and thus cannot propose revised tariff schedules, ln
addition, the calculated impacts of the 2017 Tax Act in the attached schedule are only estimates
based on 2017 financial results, rather than the actual impacts that are more appropriately measured
against 2018 financial results. Any proposed reduction in rates may cause Company to run afoul of
minimum rates required to be charged in order to be eligible for state or federal USF funding.
Company will await the Commission's actions to determine if Company should file changes to rates
and USF funding to recognize the impacts of the 2017 Tax Act or if Company desires to initiate a rate
case to determine what, if any, changes are required to be made to the rates charged by Company.
Company remains ready to cooperate with the Gommission to provide updates to the attached
information as they become available.
Rich Redrnen .-tru
Albion Telephone Company
225W North Street
Albion, lD 83311
Telepho[o Company
FcC Account.nd
Descrlpilon
Totel ldaho
Operatlont
Subloct To
Sep!rrllon!
Prolectod lntrsstato
Allocellon
FEctor
ProJectod
lntra3t!te
Total il
Proroctod
Trx Rofom
lntfestrte Totrl
1,1 77,007
154,58.l
506,433
27,O82
380,307
1,468,959
1,710,157
728,777
1,742,056
55,384
65,324
464,502
'rrr,io,
l3,5il7
689
(2,751l,
100.000(M
0.o00(Fr
100.0m0%
0.0000%
1.1611%
0.0000%
0.0000%
0.0000%
0.000001
7.101't%
100.000001
100.0000%
't00.00009{
100.0000%
0.0000%
0.0000%
0.0000%
0.0381o,(
0.00000i(
100.0000%
100.000001
100.0000%
1,177 ,OO7
15,1.581
t,1?7,007
't54.581
1,939 1,939
52,1 88
1,742,056
52,1 B8
1,742,056
55,384
65,324
464,502
55,384
65,324
464,502
47 47
13,517
089
13,547
089
Operathg Rovenuos
5000 Lo.rl - Btlled
5040 EAS - Billed
5000 Olher - Billed
5081 lnlarslaloAccoss
-SLC {End User)
.ARC
-Switcfrod (TS+NTS)
-Special
-Setllemenls
-ACAM supporl (net ofostimaled HCLS)
-cAF lcc
-High Cost Loop Support
51084 lntrastale Acoesg
€wllched CIS+NTS)
-Special
- Slato USF
51tP Toll -Mossaoo
-Pdvate Line
Settloment
5200 Misc. -Bllllng & Collectlon
-Dlrec{ory Advertlslng
-Operating Rents
-Other Misc.
5300 Less: Uncollgclibl€ Rev. G)
Totel Revenues 8,61 3,358 3,724,511 | I 3;t24,511
OPERATING EXPENSE DETAIL
10.7'12
373,253
136.450
I,l 51,734
t,1 83,202
63.4954oi(
63.4954"t
44.498201
0.0000%
44.498201
0.0000%
71.34920tr
.l0,611
236,998
60,718
10,011
236,998
60,7r8
5,l2,501 512,50'l
2,801,351
776
401,278
0.0000o/r
63.495401
0.0000%
254,793 254,793
402,054 264,7s3 | |256,793
115,1 19
686,889
1,278,945
63.495401
15.000001
0.0000%
48.2711o/t
0.0000%
71.345201
0.0000%
0_o000ol
0.0000%
0.00000t
73,095 73,095
331,569
012.517
33r,569
912,517
2,080,953 1,317,18t I I I,317,181
8S,761
258,430
47,153
182,320
108,537
1,588
0,800
4,338
42.0905%
57.11ffi%
0.0000016
0.0m0%
0.0000%
55.4243%
0.0000%
68.0918%
68.092370
50.0000%
50.0000%
50.0000%
0.0000%
37,781 37.781
143,781 143,787
1?4,145
73,905
1%
4,900
2,169
124,115
73,905
794
4,900
2,169
Page 1 ol 2
SeNlca Order P.oc'-End User
.servlce Ord€r Poc.-PreEubsqlPtlon
General Supporl Facililies
Central Omce S$/ltching
General Supporl Faclllties
Cenlral Omce Svritching
Operator Systems
Central Oflice Ttansmission
lnform8llon Orig./Term. Equlp.
Cable & Wre Facililes
lntongibles
Acqulsition Adjustmenl
Diroctory Publishlng.r{pha.
Drectory Publlshlng-Clasg,ied
Direclory Publishhg-Foreign
Paymenl & Collection-End User
Billing lnquiry-End User
Deprsclatlon & Amorllzatlon
Operator Servlo€s
operator systsms
Central Otfice T,ansmlsslon
hformatlon Orig./Term. Egrllp.
cable & wre Facililies
Tolal Plant spocilic
Capital Leases
Leasehold lmprovemenls
SeNlca Ordsr Proc.-CXR
Paymoot & Collodlon-C)G
Blllhg lnqulry-CxR
Plant Nonspecllic Operallonr
Provlsionlng
Network Operations
Access Paid to LECS
Total Plant Nonspecilic
Customer Oporatlong
Malkeling
Category 2 - Rovenue Accountlng
6023
8623
Rov. Acdg.-Local Mo8E. Proc.
Rov. Acc,tg.-Olhor Elll E Coll.
-lnlerElalo End Us€r
-Message Toll - lnlerstate
-Mesiaga Toll - lnuaslalo
+ilsssage Toll - Locsl
+ilossaga Toll - EAS
Rev. Acdg.-Canier Accoss Billing6623
6623
0623
catogory 3 - All Olher Curtomar Servlce
B & C Amts Pald to LECS
Olhor Cuslomsr SaMc€
Totel Customer Operellons
6700 Co.porato Oporation3i6710 Executlv€ & Plannlng4720 GeneEl & Admlnlstrauve
Total Corporalo Oporations
Olher Oporaling Expenresi
ConUlbullons
Unlversal Sen lce Fund
Llfeline Connection Assistane
Total Olher
42,964
rB80
10,5,[3
12,403
12,403
19,277
21,253
57.1000%
0.0000%
0.0000%
100.0000%
100.0000016
0.0000%
50.0000%
0.0000%
0.0000%
24,532 24,532
12,103
12,403
12,{03
t2,403
9,139 I,139
422,670 445,958 I I 445,S5E
225,O78
605.650
55.26370t
52.5954%
126,597
318,544
126,597
318,5,14
83'1,728 445,141 I I ,045,1/tl
I 1,818 52.44450/"
0.000096
0.0(x)006
6,'198 6,198
11,818
7240 Gonoral Trxos7240 Property7210 Gross Rec€ipls7240 PUC Feo7240 Franc$lse Fees7240 Other
Tolal Genoral Taxes
Other Exponoo3:
lnter€st Exponse
Other
Total Othor
169,9s7
4.778
63.4954%
o.00000t
0.000001
o.000001
0.000001
107,0 t5 107,915
174,733 107,e15 I I r 07,915
255,714 67.9479o1
0-o000%
176,470 il 176,470
259,714 178,470 I I 176,470lt
Total Op6rating Exponeo6 7,448,021 4,418,690 | |.1,410,690tt
Not Oporatlng lncomo Boforo Taxes t,t 65,337 (694,180)l I (694,180
7200 lncome Taxes (Calculatedl
N6t lncomo Before SIT & FIT
Less Flxed Charges (-)
Subtolal (lln08 7-B)
Olher SIT Base Add/Ded. (+-)
SIT Texablo lnc. (llneB 9+-10,
7230 SIT-Cunsnl (at 6.6%)
Other FIT Bass Add/Ded. (+-1
FIT Texablo lnc. (llnss 9-12+-131
Gross FIT (at 35%AND 2l%)
7210P ClalmodlTC G)
Surlex EliminaUon (-)
7220 FIT.Curront llino! 15-16-17l
I,t 65,337
259,114
905,623
67.g47goA
0.0000%
:f:'U:fl
I
(694,180)
174,470
(870,650)
905,623 (870,65011 I (870,65[
55,771
0.0000%
(5?,463)l
I
(57,403:
846,851 (813,r87)l I (E1 3,1 87
296.048
0.0000%
o_000001 "*,:,rl I
(1 70,7691
296,048 (284,61511 I {170,769
7250 Doforred tax llabllity amortlzatlon 1421,114 63.4954%(267,40511 I (267,405
N6l oporallng lncomo (Lolrsl 1,230.658 (84,6e7I I (198,64
DEFERRED TAX LIABILITY
t1340 Dofored Tax Llibllity;
Chanoe h Def€nod T8x Llablllly
Amoilizalion p€rlod of Llablllty - Avg ]Emalnhg life of TPIS ln yeals
Annual amo,litatlon of defened reg|t latory liaHlity
EfrecUve Tex Rlto crlcuhtlon:
Federal Tax Rat€
State Tax Ral€
Federal Tax Rat€
Effectlve Tax Rat€
(3.607.320)
Is (42r,140)
g1.B3o/.
7.73%
2.68%
34.63crG'------ffi
24.11%
7.76%
2.18%
28,14vo
30.32%
Nole:
Allocation faclors trom lhe 2016 cost study unloss olherwise noted
Page 2 ot 2