III. CONCLUSION

Based on the above, a limited rehearing of Resolution T-17132 is granted on the executive compensation issue. As to all other issues, no legal error has been demonstrated. However, the Resolution is modified for purposes of clarification as explained above. Except as to the executive compensation issue, rehearing of Resolution T-17132, as modified, is denied in all other respects. Also, Ponderosa's request for oral argument and for a memorandum account are denied.

1. Resolution T-17132 is hereby modified to fully explain how the benefits-to-salary ratio of 42% was derived and why 42% was reasonable in light of the whole record. The last paragraph on page 11 and the first full paragraph on page 12 should be eliminated, as should the second and third full paragraphs on page 18, and they are hereby replaced as follows:

"The Resolution's adoption of the 42% benefits-to-salary ratio was based on different sets of data, which are part of the record. The primary data set relied upon by CD in determining a reasonable benefits-to-salary ratio for ratemaking purposes for Ponderosa was a United States Department of Labor, Bureau of Labor Statistics (BLS) document entitled "Employer Costs for employee compensation - September 2008," dated December 10, 2008. (See http://www.bls.gov/news.release/ecec.nr0.htm.)

We regard this data as the best available information to determine the reasonable range of benefits-to-salary ratios available at the time that CD Staff analyzed Ponderosa's GRC. We considered the BLS data for the latest available data for similarly situated companies by size, location, and operation type, as well as other indicators, such as the range of ratios, whether the companies are private or governmental, whether their workers are full-time or part-time, unionized or non-unionized, or in management, sales or service jobs.

Examples of BLS data in the record supporting a 42% ratio are as follows: Table 1 - all civilian workers by major occupational group - 43%; Table 2 - all civilian workers by occupational and industry group - a low of 33% and a high of 51%; Table 5 - non-unionized private industry workers by major occupational group - 38%; Table 6 - trade, transportation and utilities private industry group - 41%; Table 7 - private industry by census region and division and area - western divisions (Pacific) - 42%; Table 8 - private industry by establishment size (1-99 workers) - a range of 35-39%; Table 11 - all full time private industry workers in trade, transportation and utilities - 43%. From this data, we found little to support Ponderosa's argument that for ratemaking purposes, a 54% benefits-to-salary ratio was reasonable.

The second set of data we compared Ponderosa to was the annual report filings and general rate cases of small California water companies ranging from 2,000-10,000 customers. This refers to the Kenwood GRC filing for Test Year 2009, with a 35% ratio; Alco Annual Report for 2007, with a 48% ratio; East Pasadena Annual Report for 2007, with a 24% ratio; Fruitridge Annual Report for 2007, with a 25% ratio; and Penngrove Annual Report for 2007, with a ratio of 32%. The 33% average ratio for these five companies was calculated by adding the ratios of each of the five utilities and then dividing the total by 5.

Like Ponderosa, these are California utilities of similar size, that are regulated by this Commission, and who have recently filed Annual Reports or GRC's with the Commission. Furthermore, they all provide services regarded as a public necessity, and require a workforce with a similar skill-set to that of small LECs. Our reference to the water companies provides a reasonable point of comparison from which to analyze what a reasonable range for the benefits-to-salary ratio would be for Ponderosa. We regarded the comparison reasonable as the water company data was recent, available, verifiable, and could provide an example of what companies of this size, location and service provided to their employees in terms of benefits."

2. Resolution T-17132 is further modified to add Finding No. 14, which should read as follows: "The evidence in the record supports the adoption of a 42% benefits-to-salary ratio."

3. The second sentence of the first full paragraph on page 12, and the second sentence of the third full paragraph on page 18, are modified to remove any reference to the word "cap," and the text for this sentence on both pages is modified to read as follows:

The BLS ratio supports CD's proposed rate of 42%. CD concludes that its proposed 2009 regulated benefits to salaries/wages ratio of 42% for Ponderosa is appropriate and adequate.

On page 9, in the last full paragraph, "(d) capped benefits at 42% of salaries and wages" should be replaced by "(d) benefits at 42% of salaries and wages."

4. Resolution T-17132 is modified to add Finding of Fact No. 15, which states: "Based on the evidence, it is reasonable to adopt an access line loss of <0.95%>."  

5. A limited rehearing is granted to develop a clearer record to determine the salaries and wages for Ponderosa's President and Vice-President. Within 30 days from the issuance of this Decision, Ponderosa is hereby ordered to resubmit to CD Staff, as a supplement to AL Nos. 374 and 374-A ("Supplemental AL"), all information it deems appropriate to substantiate this request. Staff will review the Supplemental AL, and may propound further data requests requesting more information as CD deems necessary.

CD shall prepare a draft resolution for Commission consideration. Should it be determined that evidentiary hearings are necessary, CD Staff shall make this recommendation in the resolution. Ponderosa may also request evidentiary hearings by making such a request in the Supplemental AL. In that event, Ponderosa should explain why evidentiary hearings are necessary, and what material factual issues are in dispute that would warrant evidentiary hearings before an Administrative Law Judge.

6. Ponderosa's request for oral argument under Rule 16.3 of the Commission's Rules of Practice and Procedure is denied.

7. Ponderosa's request for a memorandum account is denied.

8. The Executive Director shall cause to be served today's decision disposing of the rehearing application on all interested parties on the service list for A.09-03-008.

9. Except for the limited rehearing granted on the executive compensation issue, rehearing of Resolution T-17132, as modified, is hereby denied in all other respects.

This order is effective today.

Dated May 20, 2010, at San Francisco, California.

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