Comments on Concluding the Proceeding
In its comments, AT&T California noted that Frederick & Warinner's vintage audit report concerned the allocation and transfer of pension assets. It reiterated that since the auditors found that the Agreement, D.93-11-011, and the Commission's affiliate transaction rules had been deemed complied with in all material respects, the Commission took no further action following submission of the report. AT&T California asserted that the auditors found that the transfer of pension assets also complied with the Separation Agreement. It argued, however, that the auditors raised the speculative concern that depending on unknown future ratemaking treatment, the transfer had the potential to affect AT&T California ratepayers negatively. The incumbent local exchange carrier dismissed this concern.
AT&T California stated that under the then-existing regulatory framework,10 its prices had not been established based on AT&T California's cost of providing service. Consequently, there could be no further "ratemaking" applicable to these costs. As a result, prices have not changed because of changes in pension costs, and customers have not been affected by any changes in pension costs. In addition, AT&T California maintained that its New Regulatory Framework start-up rates contained zero pension costs. It declared that the risk of cost recovery and changes in pension costs are borne by shareholders, and not by customers. AT&T California proclaimed the auditor's concern and recommendation to be moot. (AT&T California Comments at 4.)
Given the passage of time, AT&T California stressed the difficulties of conducting a further investigation of this matter. The PacTel Corporation companies that were the subject of the spin-off (e.g., AirTouch), have since merged with other entities or ceased to exist. Moreover, AT&T California noted that the extent of the Commission's regulation of wireless companies also has changed. See 47 U.S.C. § 332. Further, AT&T California pointed out that reopening any portion of the spin-off transaction at this juncture not only would present practical difficulties, but also would directly conflict with the regulatory certainty the Commission sought to achieve when it ordered the audit to be undertaken immediately and be completed as soon as reasonably possible.
Finally, AT&T California insisted that further investigation would be inappropriate based on additional public policy considerations. Over time, evidence can be lost, memories fade, and witnesses become unavailable.
AT&T California asserted that it would be prejudicial to the parties to the spin-off transaction to subject the matter to capriciousness and challenge so long after the audit report was submitted. For all of these reasons, AT&T California argued that no further proceedings are warranted, and this docket should be closed.
In its comments, DRA declared that the remaining issues in the proceeding were neither academic nor moot, and urged the Commission to conclude the case by following its predecessor's recommendations regarding the decade-old audit report. DRA characterized the issue of whether the Commission continued to have the jurisdictional authority to require the production of further information necessary to resolve the pension question as unclear. DRA advised that it appeared that the Commission retained jurisdiction over the PacTel's successors to enforce the conditions of the spin-off under PG&E v. Public Utilities Commission,11 and to investigate whether pension assets were improperly transferred in the spin-off. It urged the Commission to assert jurisdiction.
DRA reiterated in its comments on the audit report that the audit was incomplete and deficient for failing to calculate the identified surplus pension assets that were improperly allocated to PacTel. It strongly recommended that an independent actuarial consultant be hired to complete the calculation and any pension surplus improperly transferred to PacTel be returned to Telesis' Master Trust.
DRA also recommended the actuarial consultant (1) review the entire pension asset transfer chronology, and (2) perform/supervise a recalculation of the 1993 and 1994 pension asset transfers from the Telesis pension Trust to the AirTouch Trust. DRA also stated that the identified violations of the Separation Agreement should be corrected and any refunds be made with interest.
DRA further urged the Commission to have the Communications Division seek bids for, hire, and manage a new auditing consultant to administer the work needed to resolve the remaining issues in this docket. It has advised that once a new study is completed, DRA would further participate by filing comments on how any surplus should be treated and dispersed.
10 Referred to as the New Regulatory Framework, which was adopted in D.89-10-031.
11 PG&E Corp., Petitioner v. Public Utilities Commission, Respondent; Office Ratepayer Advocates et al., Real Parties in Interest, (Cal. Ct. App., 2004) 118 Cal App 4th 1174, 2204 Cal App. Lexis 785.
