Cal-Ore asserts the Resolution should be modified to correct a calculation error with respect to the addition of a central office technician position with an annual salary of $60,000. This position was filled starting in June, 2007. Thus, only 7 months of position-related expenses were included in the recorded expense for 2007. Cal-Ore states that it annualized the salaries and wages expense for this employee for 2008 and test year 2009. However, Cal-Ore states that the full year's salary for this position was not included by CD for 2008 and for test year 2009, but rather, CD only used 7 months salary for this position for 2008 and 2009 as was recorded in 2007. Cal-Ore calculates that the corrections, using inflation factors (2.9% for 2008, 3.9% for 2009) would result in an increase of $26,728. Applying a benefits ratio of 42%, Cal-Ore calculates that the total increase in expenses would be $37,954. After applying the intrastate separations factor, Cal-Ore obtains an intrastate expense increase of $18,882 for 2009.

CD agrees that a correction is in order here as there was no intention to disallow five months of annual salary for this position. However, CD calculates that the adjustment results in an increase in expenses of $6,294. This difference stems from Cal-Ore misunderstanding CD's estimating methodology which relies on three recorded years rather than just one. Specifically, CD uses recorded expense figures for 2005, 2006, and 2007 and converts them to constant 2007 dollars. CD then takes the average of these inflation adjusted amounts for these three years and uses that as a base to develop its forecasts for 2008 and 2009; i.e., CD's forecasts for 2008 and 2009 are not based on 2007 data alone. Consequently, CD recommends increasing the total company expenses for the test year by $12,651 and increasing the intrastate expenses after separations by $6,294, in the Resolution and in all related accounts as well as in the Resolution's Results of Operations tables. These changes result in an increase to Cal-Ore's CHCF-A funding amount of $6,399.

The Commission agrees with the recommendation that the salary and benefit expense for the central office technician should be adjusted to correct the error in the amounts indicated by CD.

Cal-Ore states in its Petition that the Resolution should be modified to correct a calculation error with respect to Intrastate Network Access Services revenue. Cal-Ore indicates that 2007 actual intrastate network access revenues were $679,138. Page 6 of the Resolution stated:

CD is projecting a more modest 13.11% decrease in Intrastate Network Access Services revenue for 2009, resulting in the proposed revenue amount of $534,204 for the test year.

Cal-Ore asserts that if the 13.11% deflation factor is applied to the above-stated 2007 actual intrastate network access revenue for 2008 and for 2009, this will result in a 2009 intrastate access revenue of $512,741. Consequently, Cal-Ore contends that 2009 intrastate access revenues adopted in the Resolution have been overstated by $21,463.

Upon review of the Petition, CD noted that the text of the Resolution contains an incorrect deflation factor (13.11%). This is a typographical error that does not agree with the adopted results of operations. The correct deflation factor should be 11.31%. Although the Resolution incorrectly stated the Intrastate Network Access Services deflation factor, the work papers utilized the proper deflation factor of 11.31%, and the adopted Results of Operations total used the correct figure for Intrastate Access Charges. Therefore, Cal-Ore's request to modify the amount of revenues in the Resolution is not accepted. We will, however, correct the deflation factor in the text.

Cal-Ore states in its Petition that the Resolution should be modified to correct a calculation error with respect to the 2009 accumulated depreciation. Cal-Ore asserts that the accumulated depreciation shown in the Appendices and adopted in the Resolution is overstated by $125,000.

CD agrees with Cal-Ore and acknowledges using the incorrect total company accumulated depreciation amount of ($20,384,104) as shown in Appendices A and B of Resolution T-17133. CD recommends increasing the total company accumulated depreciation for test year 2009 to ($20,259,104) in the Resolution's Appendices A and B. CD recommends that the intrastate accumulated depreciation be increased by $70,925 to ($11,495,016) in Appendix C of the Resolution. These changes will result in an additional amount of $11,784 in CHCF-A funding to Cal-Ore. We find that the accumulated depreciation amounts should be corrected as indicated above.

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