7. Comments on Proposed Decision
The proposed decision of the ALJ in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and comments were allowed under Rule 14.3 of the Commission's Rules of Practice and Procedure. Happy Valley, Hornitos and Winterhaven commented in support of the proposed decision finding that they had not violated the High Cost Fund A rules. These parties opposed the finding that they had violated Rule 1.1.
The other applicants opposed the proposed decision and contended that they had not violated any Commission decision or directive. These applicants reiterated their contention that the interest rate in D.91-09-042 was punitive and violated § 2107, as well as their argument that the Rural Telephone Bank stock was an unregulated shareholder asset. Both of these arguments are addressed above.
Findings of Fact
1. Happy Valley Telephone Company, Hornitos Telephone Company, and Winterhaven Telephone Company did not seek and did not receive support payments under California High Cost Fund A in 2007.
2. Calaveras Telephone Company, Cal-Ore Telephone Company, Ducor Telephone Company, Kerman Telephone Company, The Ponderosa Telephone Company, Sierra Telephone Company, Inc., the Siskiyou Telephone Company, and Volcano Telephone Company filed advice letters in 2006 to receive funds from the California High Cost Fund A in 2007.
3. The California High Cost Fund A advice letter must include "at least seven months of recorded financial data" and the form includes a line for miscellaneous operating revenue. All utility revenue must be included in the means test to give the Commission an accurate financial picture of the utility's past and projected revenue.
4. The applicants' omission of significant public utility operating revenue from the California High Cost Fund A advice letter means test interfered with the Commission's regulatory duty to fairly administer the Fund.
5. Stock redemption payments from the Rural Telephone Bank for stock purchased with public utility loans or as refund of interest paid on such loans is public utility operating revenue.
6. Calaveras Telephone Company, Cal-Ore Telephone Company, Ducor Telephone Company, Kerman Telephone Company, The Ponderosa Telephone Company, Sierra Telephone Company, Inc., the Siskiyou Telephone Company, and Volcano Telephone Company all did not report the revenue each received from the Rural Telephone Bank stock redemption in their California High Cost Fund A advice letter filed in 2006.
7. Calaveras Telephone Company, Cal-Ore Telephone Company, Ducor Telephone Company, Kerman Telephone Company, The Ponderosa Telephone Company, Sierra Telephone Company, Inc., the Siskiyou Telephone Company, and Volcano Telephone Company failed to prevent, detect, or correct their omissions of Rural Telephone Bank proceeds in the 2006 California High Cost Fund A advice letters.
8. All of the applicants are small local exchange companies with limited finances.
9. Calaveras Telephone Company, Cal-Ore Telephone Company, Ducor Telephone Company, Kerman Telephone Company, The Ponderosa Telephone Company, Sierra Telephone Company, Inc., the Siskiyou Telephone Company, and Volcano Telephone have undermined the integrity of the regulatory process by omitting pertinent financial information in their 2006 California High Cost Fund A advice letters.
10. In the initial application, only Calaveras Telephone Company, Cal-Ore Telephone Company, Ducor Telephone Company, The Ponderosa Telephone Company, and the Siskiyou Telephone Company disclosed that they received any Rural Telephone Bank stock redemption proceeds.
11. Happy Valley Telephone Company, Hornitos Telephone Company, Kerman Telephone Company, Sierra Telephone Company, Inc., Volcano Telephone Company, and Winterhaven Telephone Company did not disclose that they had received any funds whatsoever from the Rural Telephone Bank stock redemption in their initial applications seeking a ratemaking determination regarding dissolution of the Rural Telephone Bank.
12. A vague reference to an unquantified value of patronage stock in a footnote does not inform the Commission and prospective parties of the amount at issue.
13. No evidence has been presented to support a good-faith belief that the Commission disclaimed ratemaking jurisdiction over or interest in the $24 million of patronage refund stock.
14. All public utility revenue is subject to the Commission's jurisdiction under cost-of-service ratemaking.
15. The initial application in this proceeding revealed only a small portion of the total revenue received from the Rural Telephone Bank dissolution and created a misleading impression of the amount at issue pursuant to the application.
16. Misleading or incomplete representations to the Commission undermine the regulatory process and impede the Commission in performance of its duties.
17. Applicants failed to prevent, detect, or disclose and rectify their violations of the California High Cost Fund A means test requirements or the Rule 1.1 violations.
18. The highest level of fine is necessary to deter future violations where multi-million dollar windfalls are at issue.
19. No evidence was presented that the Commission intended the 10% interest rate adopted for California High Cost Fund A, B, and the California Teleconnect Fund program to be punitive.
20. California telephone corporations may charge customers an interest rate of up to 18% annually.
21. The cost of capital included in each applicant's revenue requirement is 10%.
Conclusions of Law
1. No hearing is necessary.
2. Pursuant to Pub. Util. Code § 2107, the Commission is vested with the authority to fine a public utility which violates or fails to comply with any Commission decree or directive between $500 and $20,000 per offense.
3. Happy Valley Telephone Company, Hornitos Telephone Company, and Winterhaven Telephone Company have shown good cause to not be fined for failure to disclose Rural Telephone Bank proceeds in their California High Cost Fund A filings.
4. Happy Valley Telephone Company, Hornitos Telephone Company, and Winterhaven Telephone Company should not be fined for a violation of D.91-09-042.
5. Rural Telephone Bank stock cannot be an unregulated investment of the shareholders and must be part of the regulated public utility operations of each applicant.
6. Calaveras Telephone Company, Cal-Ore Telephone Company, Ducor Telephone Company, Kerman Telephone Company, The Ponderosa Telephone Company, Sierra Telephone Company, Inc., the Siskiyou Telephone Company, and Volcano Telephone Company were required by D.91-09-042 to disclose the Rural Telephone Bank stock redemption proceeds in their 2006 Advice Letters seeking California High Cost Fund A funds.
7. Calaveras Telephone Company, Cal-Ore Telephone Company, Ducor Telephone Company, Kerman Telephone Company, The Ponderosa Telephone Company, Sierra Telephone Company, Inc., the Siskiyou Telephone Company, and Volcano Telephone Company violated D.91-09-042 by failing to disclose the Rural Telephone Bank stock redemption proceeds in their 2006 Advice Letters seeking California High Cost Fund A funds.
8. The public interest requires that Calaveras Telephone Company, Cal-Ore Telephone Company, Ducor Telephone Company, Kerman Telephone Company, The Ponderosa Telephone Company, Sierra Telephone Company, Inc., the Siskiyou Telephone Company, and Volcano Telephone Company pay the highest fine amount allowed by § 2107 for violating D.91-09-042 because they omitted pertinent financial information, undermined the regulatory process, failed to correct their omissions, and failed to bring this violation to the Commission's attention.
9. Calaveras Telephone Company, Cal-Ore Telephone Company, Ducor Telephone Company, Kerman Telephone Company, The Ponderosa Telephone Company, Sierra Telephone Company, Inc., the Siskiyou Telephone Company, and Volcano Telephone Company's interest rate for the entire period should be increased to 10% as required by D.91-09-042, and their refund obligation should be recalculated with conforming changes made to the refund tariffs or California High Cost Fund A draw.
10. Rule 1.1 of the Commission's Rules of Practice and Procedure states that any person who transacts business with the Commission agrees to "never mislead the Commission or its staff by an artifice or false statement of law or fact."
11. The applicants' incomplete application violated Rule 1.1 by creating a misleading impression of the amount at issue.
12. Rule 1.1 and the proper functioning of the Commission's proceedings require actual notice of relevant and material facts, and constructive notice can not be used to remedy deficiencies in a document presented to the Commission.
13. All public utility revenue is subject to the Commission's ratemaking jurisdiction for cost-of-service regulated utilities.
14. The public interest requires that Happy Valley Telephone Company, Hornitos Telephone Company, Kerman Telephone Company, Sierra Telephone Company, Inc., Volcano Telephone Company, and Winterhaven Telephone Company pay a fine $20,000 each because they omitted pertinent financial information, undermined the regulatory process, failed to correct their omissions, and failed to bring this violation to the Commission's attention.
15. Calaveras Telephone Company, Cal-Ore Telephone Company, Ducor Telephone Company, The Ponderosa Telephone Company, and the Siskiyou Telephone Company acknowledged and disclosed a portion of their Rural Telephone Bank stock redemption proceeds in their initial application and should be granted a small reduction in their Rule 1 violation fines for displaying some degree of candor with the Commission.
16. The public interest requires that Calaveras Telephone Company, Cal-Ore Telephone Company, Ducor Telephone Company, The Ponderosa Telephone Company, and the Siskiyou Telephone Company pay a fine of $15,000 each for violating Rule 1 in their application.
17. In sum, applicants should be fined the following amounts:
Telephone Company |
California High Cost Fund A Violation Fine |
Rule 1 |
Total Fine |
Calaveras |
$20,000 |
$15,000 |
$35,000 |
Cal-Ore |
$20,000 |
$15,000 |
$35,000 |
Ducor |
$20,000 |
$15,000 |
$35,000 |
Happy Valley |
$0 |
$20,000 |
$20,000 |
Hornitos |
$0 |
$20,000 |
$20,000 |
Kerman |
$20,000 |
$20,000 |
$40,000 |
Ponderosa |
$20,000 |
$15,000 |
$35,000 |
Sierra |
$20,000 |
$20,000 |
$40,000 |
Siskiyou |
$20,000 |
$15,000 |
$35,000 |
Volcano |
$20,000 |
$20,000 |
$40,000 |
Winterhaven |
$0 |
$20,000 |
$20,000 |
ORDER
Therefore, IT IS ORDERED that:
1. Calaveras Telephone Company must pay a fine of $35,000 to the State of California General Fund and tender to the Commission's Fiscal Office within 20 days from the effective date of this Order.
2. Cal-Ore Telephone Company must pay a fine of $35,000 to the State of California General Fund and tender to the Commission's Fiscal Office within 20 days from the effective date of this Order.
3. Ducor Telephone Company must pay a fine of $35,000 to the State of California General Fund and tender to the Commission's Fiscal Office within 20 days from the effective date of this Order.
4. Happy Valley Telephone Company must pay a fine of $20,000 to the State of California General Fund and tender to the Commission's Fiscal Office within 20 days from the effective date of this Order.
5. Hornitos Telephone Company must pay a fine of $20,000 to the State of California General Fund and tender to the Commission's Fiscal Office within 20 days from the effective date of this Order.
6. Kerman Telephone Company must pay a fine of $40,000 to the State of California General Fund and tender to the Commission's Fiscal Office within 20 days from the effective date of this Order.
7. The Ponderosa Telephone Company must pay a fine of $35,000 to the State of California General Fund and tender to the Commission's Fiscal Office within 20 days from the effective date of this Order.
8. Sierra Telephone Company, Inc. must pay a fine of $40,000 to the State of California General Fund and tender to the Commission's Fiscal Office within 20 days from the effective date of this Order.
9. The Siskiyou Telephone Company must pay a fine of $35,000 to the State of California General Fund and tender to the Commission's Fiscal Office within 20 days from the effective date of this Order.
10. Volcano Telephone Company must pay a fine of $40,000 to the State of California General Fund and tender to the Commission's Fiscal Office within 20 days from the effective date of this Order.
11. Winterhaven Telephone Company must pay a fine of $20,000 to the State of California General Fund and tender to the Commission's Fiscal Office within 20 days from the effective date of this Order.
12. The interest rate for the refunds ordered in Decision 10-06-029 from Calaveras Telephone Company, Cal-Ore Telephone Company, Ducor Telephone Company, Kerman Telephone Company, The Ponderosa Telephone Company, Sierra Telephone Company, Inc., the Siskiyou Telephone Company, and Volcano Telephone Company's must be increased to 10% and these applicants must file, no later than 45 days after the effective date of this order, Tier 2 advice letters recalculating their refund obligation and making conforming changes to the refund tariffs or California High Cost Fund A draw.
13. This proceeding is closed.
This order is effective today.
Dated March 10, 2011, at San Francisco, California.
MICHAEL R. PEEVEY
President
TIMOTHY ALAN SIMON
MICHEL PETER FLORIO
CATHERINE J.K. SANDOVAL
Commissioners
