Background
In December 1992, the Pacific Telesis Group's (Telesis)1 Board of Directors voted to divest its wireless companies and to spin-off these subsidiaries into a separate company, referred to as PacTel Corporation or PacTel.2 PacTel was to include the wireless operations of PacTel Cellular, Pacific Telesis International, PacTel Paging, PacTel Services, Locations Technologies, and 51% of PacTel Teletrac. The remaining corporate entity was to consist primarily of Telesis, the holding company and the wireline regional Bell Operating Companies, Pacific Bell Telephone Company (currently doing business as AT&T California) and Nevada Bell Telephone Company (dba AT&T Nevada).
In February 1993, the Commission initiated this proceeding by issuing an Order Instituting Investigation into the Telesis spin-off proposal.3 Posing a series of questions, the order required Telesis to "provide a comprehensive description of the spin-off and a showing as to its effects." (51 CPUC2d 728, 734 (1993)) Ultimately, after examining the Telesis proposal in light of Public Utilities (Pub. Util.) Code § 851 and two other key statutes,4 the interim decision determined that "no assets used and useful in the conduct of a utility business" were to be transferred away from any of the operating utilities.5 The Commission also required Telesis and AirTouch to transfer or allocate "any assets necessary or useful to the California operating utility . . . or the California wireless utilities" to the appropriate entity.
Since the terms of the proposed transaction were not finalized during the pendency of the investigation and there was the possibility that utility property might be transferred after it was consummated, the Commission ordered a compliance report of the separation transaction by an independent auditor. The Commission directed the immediate commencement of the compliance report, and the auditor was to complete it as soon after the date of final separation as reasonably possible.
Pursuant to Decision (D.) 93-11-011,6 Telesis selected the independent auditing firm of Frederick & Warinner with the Commission's approval. The consulting contract was between Frederick & Warinner and the Commission, with Telesis obligated to reimburse the Commission "for all consultant expenses incurred to accomplish the report." (Id.) The predecessor to the Communications Division7 administered the contract. Frederick & Warinner submitted its report8 on November 7, 1994. No further action took place following submission of the report.
The report's overall assessment was that the Separation Agreement,
D.93-11-011, and the Commission's affiliate transaction rules had been complied with during the separation transaction in all material respects. However, the report indicated that a discrepancy had been detected in the transaction in the area of payment responsibility for employee benefits plans. While the report quantified the impact of the discrepancy on Telesis and AirTouch, it noted that quantifying the smaller direct impact on AT&T California ratepayers was contingent upon several future variables, and consequently declined to do so.
Further investigation of the reported employee benefits plans' discrepancy as well as the capacity to quantify and assess substantiated payment responsibility are complicated by the fact that both the transferor (Telesis) and transferee (AirTouch) have since merged with other companies, one over which we have jurisdiction, while the other operates largely outside of our regulatory purview.
On June 3, 2004, the assigned Administrative Law Judge (ALJ) issued a ruling soliciting comments on concluding the instant proceeding. Specifically, the ruling asked parties: 1) whether or not, given the passage of time and jurisdictional issue, the proceeding had become academic or moot; (2) if not, how the Commission should conclude it; and (3) whether, and to what extent, the commenter wished to participate in any concluding phase of the case. AT&T California and the Division of Ratepayer Advocates9 (DRA) responded on
June 17, 2004. No other party filed comments.
On April 11, 2006, the ALJ asked AT&T California to brief the Commission as to whether there were remaining issues in this docket that had any New Regulatory Framework implications.
1 Telesis, one of the original seven regional holding companies, was the parent of two Bell Operating Companies and certain diversified subsidiaries listed herein.
2 Initially named PacTel, but subsequently renamed AirTouch.
3 In January 1993, the Telesis Board, asserting that the proposal did not require Commission authorization, provided the Commission with a written description of the plan to spin-off its wireless subsidiaries.
4 Pub. Util. Code §§ 818 and 854.
5 Including AT&T California and the California wireless utilities.
6 The decision provided that the auditing firm should be selected so as to avoid conflicts of interest relating to the firm's other business, if any, with Telesis, AT&T California, or PacTel. (51 CPUC2d at 770.)
7 The Commission's Advisory and Compliance Division.
8 Confidential and redacted versions of "Results of the Audit of the Separation of the Pacific Telesis Group of Companies Prepared for the California Public Utilities Commission."
9 Formerly doing business as SBC California and designated as the Office of Ratepayer Advocates, respectively.
