Findings
1. Ponderosa Telephone Company (Ponderosa) filed its 2009 test year General Rate Case (GRC) by Advice Letters (AL) No. 374 and No. 374A on December 28, 2007 and June 10, 2008, respectively.
2. Ponderosa requests the following for test year 2009:
· The tariff changes as described in the "Revenue" section of this resolution;
· An intrastate rate of return (ROR) of 10.00%, the same return granted to it in its last GRC filing in 2003;
· Total intrastate operating revenue of $17,010,499;
· Total intrastate operating expenses of $14,565,382;
· Total intrastate rate base amount of $24,451,169; and
· A California High Cost Fund-A (CHCF- A) draw of $6,320,400.
3. The Communications Division (CD) recommends the following for Ponderosa for test year 2009:
· The tariff changes as described in the "Revenue" section of this resolution;
· An intrastate Rate of Return (ROR) of 10.00%;
· Total intrastate operating revenue of $15,316,206;
· Total intrastate operating expenses of $13,244,413;
· Total intrastate rate base amount of $20,719,889; and
· CHCF- A draw of $3,699,788
4. The Commission finds that the differences in Ponderosa's and CD's estimates result from the use of different assumptions for estimating revenues, expenses, and rate base.
5. The Commission finds CD's methodology in estimating revenues reasonable.
6. The Commission finds CD's methodology of using ratemaking adjustments to each of the expense accounts, and CD's use of inflation factors to adjust the labor and non-labor 2007 expenses for test year 2009, reasonable. The Commission also finds CD's reduction to executive compensation reasonable. Therefore, the Commission adopts CD's recommended test year 2009 expenses contained in Appendix C; Column E.
7. The Commission finds CD's methodology in estimating Ponderosa's plant and other rate base items reasonable. The Commission therefore, adopts CD's recommended plant and other rate base items for the 2009 test year as shown in Appendix C; Column E.
8. The Commission finds an overall intrastate ROR of 10.00% for Ponderosa for test year 2009, to be reasonable.
9. The Commission finds CD's recommended $3,616,518 in CHCF-A support for Ponderosa for test year 2009, to be reasonable. The $3,616,518 CHCF-A support is based on the Commission's adoption of CD's Intrastate Results of Operations for Ponderosa for test year 2009.
10. The Commission finds CD's request for rate increases in the amount of $377,478, which are due to increases in basic rates, some optional services and one time charges, to bring Ponderosa's prices more in line with other companies in the telephone industry, to be reasonable.
11. The Commission finds CD's recommendation that the Commission waive the 30-day notice period required under G.O. 96-B and to allow Ponderosa to file a Tier 2 Advice Letter supplement revision to its tariff schedules for all increases and changes to its rates and charges as contained in this resolution, to be reasonable.
12. The Commission finds CD's application of a benefit to salary ratio of 42% for ratemaking purposes to be reasonable.
13. The Commission finds CD's recommendation that Ponderosa provide notice of all increases and changes to its rates and charges to all its customers within 7 days of the adoption of this resolution, to be reasonable.
14. Commission approval is based on the specifics of this Advice Letter and does not establish a precedent for the contents of any future filings.
THEREFORE, IT IS ORDERED that:
1. The revised intrastate revenues, expenses, and rate base amounts for test year 2009 identified in Appendix C; Column E are adopted for the Ponderosa Telephone Company.
2. The overall intrastate rate of return of 10.00% is adopted for the Ponderosa Telephone Company for test year 2009.
3. Ponderosa shall provide a notice to all customers, within 7 days of the adoption of this resolution, notifying them of the increases and changes to all Ponderosa's rates and charges as contained in this resolution.
4. Ponderosa shall file a Tier 2 Advice Letter supplement revision to its tariff schedules for all increases and changes to its rates and charges, as contained in this resolution, within 7 days of adoption of this resolution. The effective date of all increases and changes shall be February 1, 2009. To the extent the carrier can not implement the adopted rate changes in their February billings, the carrier may implement a surcharge to recover the differential between the Commission adopted rates and those charged by the carrier. The carrier must collect the differential before the conclusion of 2009.
5. The Ponderosa Telephone Company's California High Cost Fund-A draw for 2009 shall be $3,699,788.
This Resolution is effective today.
I hereby certify that this Resolution was adopted by the Public Utilities Commission at its regular meeting on January 29, 2009. The following Commissioners approved it:
/s/ Paul Clanon |
PAUL CLANON Executive Director |
MICHAEL R. PEEVEY President |
DIAN M. GRUENEICH |
JOHN A. BOHN |
RACHELLE B. CHONG |
TIMOTHY ALAN SIMON |
Commissioners |
APPENDIX A
PONDEROSA TELEPHONE COMPANY
TOTAL COMPANY RESULTS OF OPERATIONS
PRESENT RATES - TEST YEAR 2009
UTILITY EXCEED STAFF | ||||||
($) |
(%) | |||||
PONDEROSA |
CD |
AMOUNT |
DIFF. | |||
(A) |
(B) |
(C) |
(D) | |||
OPERATING REVENUES: |
||||||
1 |
Local Network Services* |
2,813,097 |
2,841,261 |
(28,164) |
-0.99% | |
2 |
Local Service - CHCF - A |
2,254,710 |
2,254,710 |
- |
0.00% | |
3 |
Interstate USF |
6,556,611 |
6,997,308 |
(440,697) |
-6.30% | |
4 |
Network Access Services: |
|||||
5 |
Intrastate |
1,001,399 |
866,778 |
134,621 |
15.53% | |
6 |
Interstate |
7,045,061 |
7,045,061 |
- |
0.00% | |
7 |
Miscellaneous |
411,931 |
523,276 |
(111,345) |
-21.28% | |
8 |
Less: Uncollectible Revenue** |
(4,050) |
(4,091) |
41 |
-1.00% | |
|
| |||||
9 |
Total Oper. Revenue |
20,078,759 |
20,524,303 |
(445,544) |
-2.17% | |
OPERATING EXPENSES: |
||||||
10 |
Plant Specific |
3,738,332 |
3,548,332 |
190,000 |
5.35% | |
11 |
Plant Non-Specific (less depr.) |
1,922,040 |
1,796,591 |
125,449 |
6.98% | |
12 |
Customer Operations |
1,204,633 |
1,107,880 |
96,753 |
8.73% | |
13 |
Corporate Operations |
3,010,937 |
2,374,893 |
636,044 |
26.78% | |
|
14 |
Subtotal |
9,875,942 |
8,827,696 |
1,048,246 |
11.87% |
|
||||||
15 |
Depreciation & Amortization |
7,942,640 |
7,968,625 |
(25,985) |
-0.33% | |
16 |
Other Taxes |
362,422 |
374,375 |
(11,953) |
-3.19% | |
17 |
State Income Taxes |
102,640 |
244,565 |
(141,925) |
-58.03% | |
18 |
Federal Income Taxes |
359,872 |
857,482 |
(497,610) |
-58.03% | |
19 |
Total Oper. Expense |
18,643,516 |
18,272,743 |
370,773 |
2.03% | |
|
||||||
20 |
Net Revenues |
1,435,243 |
2,251,560 |
(816,317) |
-36.26% | |
AVERAGE RATE BASE: |
||||||
21 |
Telephone Plant-in-Service |
96,559,697 |
92,505,193 |
4,054,504 |
4.38% | |
22 |
Tel. Plant Under Construct. |
3,281,100 |
3,089,673 |
191,427 |
6.20% | |
23 |
Material & Supplies |
301,942 |
297,867 |
4,075 |
1.37% | |
24 |
Working Cash |
1,310,208 |
1,215,057 |
95,151 |
7.83% | |
25 |
Less: Deprec. Res. |
(66,781,688) |
(67,229,881) |
448,193 |
-0.67% | |
26 |
Def. Taxes |
(279,499) |
(1,014,782) |
735,283 |
-72.46% | |
27 |
Customer Deposit |
(16,200) |
(16,200) |
- |
0.00% | |
28 |
Total Rate Base |
34,375,560 |
28,846,927 |
5,528,633 |
19.17% | |
29 |
Rate of Return |
4.18% |
7.81% |
|
| |
APPENDIX B
PONDEROSA TELEPHONE COMPANY
TOTAL COMPANY RESULTS OF OPERATIONS
PRESENT RATES - TEST YEAR 2009
|
|
|
|
PONDEROSA |
|
|
CD |
|
|
TOTAL |
TOTAL |
| |||||
|
COMPANY |
INTERSTATE |
INTRASTATE |
COMPANY |
INTERSTATE |
INTRASTATE | ||
|
(A) |
(B) |
(C) |
(D) |
(E) |
(F) | ||
OPERATING REVENUES: |
|
|
| |||||
|
1 |
Local Network Services |
2,813,097 |
2,813,097 |
2,841,261 |
2,841,261 | ||
|
2 |
Local Service - CHCF - A |
2,254,710 |
2,254,710 |
2,254,710 |
2,254,710 | ||
|
3 |
Interstate USF |
6,556,611 |
6,556,611 |
6,997,308 |
6,997,308 | ||
|
4 |
Network Access Services: |
|
|
| |||
|
5 |
Intrastate |
1,001,399 |
1,001,399 |
866,778 |
866,778 | ||
|
6 |
Interstate |
7,045,061 |
7,045,061 |
- |
7,045,061 |
7,045,061 |
- |
|
7 |
Miscellaneous |
411,931 |
9,762 |
402,169 |
523,276 |
9,762 |
513,514 |
|
8 |
Less: Uncollectible Revenue |
(4,050) |
(4,050) |
(4,091) |
(4,091) | ||
|
9 |
Total Oper. Revenue |
20,078,759 |
7,054,823 |
13,023,936 |
20,524,303 |
7,054,823 |
13,469,480 |
OPERATING EXPENSES: |
|
|
| |||||
|
10 |
Plant Specific |
3,738,332 |
1,105,559 |
2,632,773 |
3,548,332 |
1,049,370 |
2,498,962 |
|
11 |
Plant Non-Specific (less depr.) |
1,922,040 |
631,015 |
1,291,025 |
1,796,591 |
589,830 |
1206,761 |
|
12 |
Customer Operations |
1,204,633 |
312,004 |
892,629 |
1,107,880 |
286,944 |
820,936 |
|
13 |
Corporate Operations |
3,010,937 |
879,019 |
2,131,918 |
2,374,893 |
693,331 |
1,681,562 |
|
14 |
Subtotal |
9,875,942 |
2,927,597 |
6,948,345 |
8,827,696 |
2,619,475 |
6,208,221 |
|
15 |
Depreciation & Amortization |
7,942,640 |
2,283,874 |
5,658,766 |
7,968,625 |
2,291,346 |
5,677,279 |
|
16 |
Other Taxes |
362,422 |
104,540 |
257,882 |
374,375 |
107,988 |
266,387 |
|
17 |
State Income Taxes |
102,640 |
(181,943) |
284,583 |
244,565 |
165,364 |
79,201 |
|
18 |
Federal Income Taxes |
359,872 |
(637,922) |
997,794 |
857,482 |
579,790 |
277,692 |
|
19 |
Total Oper. Expense |
18,643,516 |
4,496,146 |
14,147,370 |
18,272,743 |
5,763,963 |
12,508,780 |
|
20 |
Net Revenues |
1,435,243 |
2,558,677 |
(1,123,434) |
2,251,560 |
1,290,860 |
960,700 |
AVERAGE RATE BASE: |
|
|
| |||||
|
21 |
Telephone Plant-in-Service |
96,559,697 |
27,323,111 |
69,236,586 |
92,505,193 |
26,175,824 |
66,329,369 |
|
22 |
Tel. Plant Under Construct. |
3,281,100 |
928,440 |
2,352,660 |
3,089,673 |
874,272 |
2,215,401 |
|
23 |
Material & Supplies |
301,942 |
79,058 |
222,884 |
297,867 |
77,991 |
219,876 |
|
24 |
Working Cash |
1,310,208 |
388,394 |
921,814 |
1,215,057 |
358,684 |
856,373 |
|
25 |
Less: Deprec. Res. |
(66,781,688) |
(18,899,685) |
(47,882,003) |
(67,229,881) |
(19,026,527) |
(48,203,354) |
|
26 |
Def. Taxes |
(279,499) |
(90,332) |
(189,167) |
(1,014,782) |
(327,971) |
(686,811) |
|
27 |
Customer Deposit |
(16,200) |
(5,236) |
(10,964) |
(16,200) |
(5,236) |
(10,964) |
|
28 |
Total Rate Base |
34,375,560 |
9,723,750 |
24,651,810 |
28,846,927 |
8,127,038 |
20,719,889 |
|
29 |
Rate of Return |
4.18% |
26.31% |
-4.56% |
7.81% |
15.88% |
4.64% |
APPENDIX C
PONDEROSA TELEPHONE COMPANY
INTRASTATE RESULTS OF OPERATIONS
PROPOSED RATES - TEST YEAR 2009
|
UTILITY EXCEED STAFF |
||||||
PONDEROSA |
CD |
AMOUNT |
PERCENTAGE |
||||
PROPOSED |
PROPOSED |
|
DIFFERENCE |
ADOPTED | |||
(A) |
(B) |
( C)=(A)-(B) |
(D) |
(E) | |||
OPERATING REVENUES: |
|||||||
1 |
Local Network Services |
2,763,915 |
3,131,113 |
(367,198) |
(11.73%) |
3,131,113 | |
2 |
Local Service - CHCF - A |
6,320,400 |
3,699,788 |
2,620,612 |
70.83% |
3,699,788 | |
3 |
Interstate USF |
6,556,611 |
6,997,308 |
(440,697) |
(6.30%) |
6,997,308 | |
4 |
Network Access Services: |
|
|||||
5 |
Intrastate |
860,510 |
975,662 |
(115,152) |
(11.80%) |
975,662 | |
6 |
Interstate |
- |
- |
- |
|
- | |
7 |
Miscellaneous |
513,514 |
516,786 |
(3,272) |
(0.63%) |
516,786 | |
8 |
Less: Uncollectible Revenue |
(4,451) |
(4,451) |
- |
0.00% |
(4,451) | |
|
|
|
| ||||
9 |
Total Oper. Revenue |
17,010,499 |
15,316,206 |
1,694,293 |
11.06% |
15,316,206 | |
|
|||||||
OPERATING EXPENSES: |
|||||||
10 |
Plant Specific |
2,848,213 |
2,498,962 |
349,251 |
13.98% |
2,498,962 | |
11 |
Plant Non-Specific (less depr.) |
1,313,520 |
1,206,761 |
106,759 |
8.85% |
1,206,761 | |
12 |
Customer Operations |
944,055 |
820,936 |
123,119 |
15.00% |
820,936 | |
13 |
Corporate Operations |
2,267,196 |
1,681,562 |
585,634 |
34.83% |
1,681,562 | |
14 |
Subtotal |
7,372,984 |
6,208,221 |
1,164,763 |
18.76% |
6,208,221 | |
|
|
|
|||||
15 |
Depreciation & Amortization |
5,658,766 |
5,677,279 |
(18,513) |
(0.33%) |
5,677,279 | |
16 |
Other Taxes |
266,387 |
266,387 |
- |
0.00% |
266,387 | |
17 |
State Income Taxes |
281,225 |
238,281 |
42,944 |
18.02% |
238,281 | |
18 |
Federal Income Taxes |
986,020 |
835,451 |
150,569 |
18.02% |
835,451 | |
19 |
Total Oper. Expense |
14,565,382 |
13,244,413 |
1,320,969 |
9.97% |
13,244,413 | |
|
|
|
|||||
20 |
Net Revenues |
2,445,117 |
2,071,793 |
373,324 |
18.02% |
2,071,793 | |
|
|||||||
AVERAGE RATE BASE: |
|||||||
21 |
Telephone Plant-in-Service |
69,025,409 |
66,329,369 |
2,696,040 |
4.06% |
66,329,369 | |
22 |
Tel. Plant Under Construction |
2,322,473 |
2,215,401 |
107,072 |
4.83% |
2,215,401 | |
23 |
Material & Supplies |
224,620 |
219,876 |
4,744 |
2.16% |
219,876 | |
24 |
Working Cash |
954,768 |
856,373 |
98,395 |
11.49% |
856,373 | |
25 |
Less: Deprec. Res. |
(47,844,245) |
(48,203,354) |
359,109 |
(0.74%) |
(48,203,354) | |
26 |
Def. Taxes |
(220,350) |
(686,811) |
466,461 |
(67.92%) |
(686,811) | |
27 |
Customer Deposit |
(11,506) |
(10,964) |
(542) |
4.94% |
(10,964) | |
|
|||||||
28 |
Total Rate Base |
24,451,169 |
20,719,889 |
3,731,280 |
18.01% |
20,719,889 | |
29 |
Rate of Return |
10.00% |
10.00% |
|
10.00% | ||
APPENDIX D
PONDEROSA TELEPHONE COMPANY
NET-TO-GROSS MULTIPLIER
TEST YEAR 2009
1 |
Gross revenue |
1.00000 | ||
2 |
Uncollectible |
0.00000 | ||
3 |
Net Revenues |
1.00000 | ||
4 |
State Income Tax (Tax Rate times Ln. 3) |
8.84% |
0.08840 | |
5 |
Federal Taxable Income (Ln. 3 Less Ln. 4) |
0.91160 | ||
6 |
Federal Income Tax (Tax Rate time Ln. 5) |
34.00% |
0.30994 | |
7 |
Net Income (Ln. 5 Less Ln. 6) |
0.60166 | ||
| ||||
8 |
Net-To-Gross Multiplier (Ln.1 Divided by Ln. 7) |
1.66207 | ||
|
Intrastate Revenue Requirement |
|||
9 |
Adopted State Rate Base |
|
20,719,889 | |
10 |
Net Revenues adopted at 10.00% (Ln. 9 Times 10%) |
2,071,989 | ||
11 |
Net Revenue In Test Year 2009 At Present Rates |
960,700 | ||
|
||||
12 |
Change in Net Revenues (Ln. 10 Less Ln. 11) |
1,111,289 | ||
13 |
GROSS REVENUE CHANGE REQUIRED (Ln. 12 time Ln. 8) |
1,847,041 | ||
|
CHCF-A SUPPORT |
|||
14 |
2009 CHCF-A SUPPORT AT PRESENT RATES |
2,254,710 | ||
15 |
2009 CHCF-A SUPPORT ESTIMATED (Ln. 14 add Ln. 13) |
4,101,751 | ||
- |
- | |||
16 |
PROPOSED NET RATE INCREASE |
401,963 | ||
17 |
2009 CHCF-A ADOPTED (Ln 15 less Ln 16) |
3,699,788 | ||
(END OF ATTACHMENT I)
