20180330Midvale Telephone Company Response.pdf

ffiMTE ldaho Public Utilities Commission-' - onrceS'dP,it'3t"o
MAR 3 0 2018
2205 Keithley Creek Road
P.O. Box 7
Midvale, lD 83645
248355.2271
Fax2O8.355.2222COMMUNICATIONS
March 30,2018 Bcrise,ldaho
Diane Hanian, Commission Secretary
ldaho Public Utilities Commission
472W. Washington
P.O. Box 83720
Boise, lD 83720-0074
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 reduction to 21o/o 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 21Yo lax rate. ln addition, each utility's report must include proposed
tariff schedules that show the revenue requirement impacts from lhe 2O17 Tax Act.
The attached worksheets are the response of Midvale Telephone Company
(hereinafter "Company"), an ESOP 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
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on the single issue of the change in tax rates. Cornpany 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 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 distribution 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 conntiction
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
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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 125% 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/lCC Transformation
Order dated November 18, 2U 1, 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-17-05 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
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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 2017 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.
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Company remains ready to cooperate with the Commission to provide updates to
the attached information as they become available.
Sincerely
PresidenUCEO
Midvale Telephone Company
2205 Keithley Creek Rd.
Midvale, lD 83645
"Employre Owned, Community Focused, Customer Centered"
MTE Communications is an equal opportunity provider and employer
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Tcl.Ohonr Cmplny
FCC AcaoJnt rnd
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Subrcct To Alloollon
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fot l
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lnlr.strtc Tot.l
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EAS - Bdlod
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335.817 335,Er7
17.143
335.817
t7.?4317,713
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6,571
47.66E
55r.2t 2
1,/t84.,191
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71 9.9t9
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7r9.9t I r0,308
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68.132
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350.785 00.fim%
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6E.'r32
38.O48
350.785
68.1 32
38.(x8
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6a8
2,239
648
?.?39
5300 Less: Uncdlocliblo Roe. (-)648
Ravonuos
E6'l
63.278
138,229
s73.304
677.489
4aE
32.909
41.?7A
448
32,909
41,278
311.774 31 1,774
62.97r
97.857 52 50.893 50.893
3.6.6E5
30.833
26Ii24
303.2+r
40.
rE0.301
r1,625
I r5.8.7
rgo.s56
180.301
1,625
1 15.847
reo,s5562 971
20,.82
650
5,693
1 mA82
650
4,030
20,482
650
4.030
1
68.381
23.664 17.275 17.275
r 7,7t9
1-1.719
12.222
13,312
12,222
13.312
Ps€e 1 ol 2
Natrc.k Slepd! Faol,ties
Gemral Suppon Facilittos
Central Otrrca S*dchr€
OpeEto, S!6lems
Cofitral Orfi 6 Transmi*bn
lntmalim Ong /Tem. Equip
Cabla E Wir6 Faolrtias
Total Planl Spcciltc
Plant tlonilEific Opentionr
PrwisionrU
NohrDrk Opectim
Accss Paid lo LECS
Total Plant Nmrpccific
Dcprcclatlon t Arnortlzatlon
Ge6al Suppod Facdiiis
C*ntral C{frce Switchirq
Ope6lor Syslms
Cental Odic8 TBEmissbn
lntmatiu Orig-rTem. Equp.
Cabb e lYirB Fec.lities
Cepi$ Loasot
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lntal€ibbs
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fotrl llcprciltlon & AmonEnion
Cu3lomsr Opcr.tioB
Mrrfielinq
OpcBlor S€ruiccs
Oheclry Publshing-Alpha,
Oirocrory Arbfishing4ls$lfi ed
Oircctory R$ltshirtg-Fdelgn
SsrvEo Order Proc.-End U*r
P8yrr€r{ & ColtoctieEnd U*t
Bilirg l'lqur}FE d User
SeNico Ord€, Proc.-CxR
Payrnenl & CrlecliorFcxFt
?.066 1.479 1.479
1,368
7,750
9,tlE
9.1 16
9.1 18
9,118
9.t18
9.1 18
1 5.5r7 7.759 7.75S
8,716
171.974
4rE.57r
18,312 78,3r?
42.1
52.
Properry
Gross Rocelpts
PUC For
Frrnahbe Fees
Otherfoftl Gchoral Tarar
60.367 52 007 1 3r.395 31.395
OrhGr Erpons.3:
lntsest ExpenseorlH
Total Oth.t
lncomr Trr!r lCalculalpdl
Nel lncme Bslo.c SIT G FIT
Less Fixod Charg€s (.)
Subtotal 01n .7-E!
orhcr sll Bsse Addoed. (+,
SIT Tarablc lnc. (lincs 0+-l0l
7230 SrT-Cmmt (ai6.6%)
Other FIT BssoAddiDcd (r-)
Flf Tarabla lnc. (lln.i 9.ll+-13)
Gross FIT (at 35% At{O 2r %}
7210P Claimet, ITC G)
Sutux Elminatim (.)
742.232
712,232
7220 FIT€umnl 1
Dclaffcd Trr Ll.bllit :
Clunge in Delened Tar LiaUlS
turortizatbn porbd ot Liatilily - Avg mairi.€ lre ol TPIS in ).Ears
Annual amortiration ot delered reodalo.y liablity
(427
(67
Tlr Rd! G.lcul.tlon:
Fedoral Tax
Slrte Tax
Federal lar
Erhdive
Notc:
Nlocation tadors trcrn lho 2OrO co8t ElrJdy t,tccr odEnfllss nolcd
Rev- Acclg--LEal Mess- Pre-
Rev. Accrg.-Otts BiI & Cdl.
'lnler3t6l€ E rd Uset
-M€ssag6 Toll - lnlerslato-lr6segs Tdl - lrtrastale
{.lssssga To{ - Local
-lressare To{ - EAS
Rev- Acdg.-Canid Acress Biuir€
Cet.rory 2 - Rlvcnuc
C{.gory 3 - Atl Oth!, CuslomGr
t0
B A C Amr3 Pald lo LECS
Olhe, Cuslomer S€ruice
Tol.l Cu3tomcr Op"muonr
Corpo6t! Op.ntims:
Eresrivo & Plamir{
Gencrol & Admlnistrative
ToUl CEpont! OgGnlloo6
OthGr Op.rrllne Erpcn3lr:
Contributions
UniYersal Scryie Furd
Lifelim Corulecbon Assistare
Tot.l Othcr
Page 2 ol 2
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