IX. Assignment of Proceeding

Rami S. Kahlon is the Examiner in this proceeding.

Findings of Fact

1. Cal-Ore, a California corporation, is a public utility telephone company subject to the jurisdiction of this Commission.

2. Cal-Ore is the incumbent local exchange carrier in four exchanges located in portions of Modoc and Siskiyou Counties, California.

3. Cal-Ore currently provides voice, DSL, and long distance services.

4. COC, Cal-Ore's affiliate, is the internet service provider within Cal-Ore's service area.

5. Cal-Ore and its affiliate plan to improve their facilities.

6. Cal-Ore, through its affiliate COC, wants to provide wireless broadband and VoIP services to a predominantly unserved rural area in northern California.

7. Cal-Ore owns the facility that will be used for backhaul, and transport. Cal-Ore will own most of the facilities to interconnect COC.

8. The Project may provide ancillary benefits to Cal-Ore's telephone service and customers.

9. Cal-Ore will charge COC for bandwidth, transport, backhaul, switching, and related telephone services.

10. Both the grant and the loan were awarded to Cal-Ore and COC pursuant to the BIP.

11. On December 3, 2010, Cal-Ore provided information that all transactions pertaining to the Project will be recorded in the books of COC. With the exception of charging for and receiving revenue from COC for the bandwidth, transport, backhaul, switching and related telephone services, Cal-Ore will not record nor show any effect on its books of the Project or the resultant revenue and expenses.

12. Section 281 encourages the deployment of high-quality advanced communications services to all Californians that will promote economic growth, job creation, and the substantial social benefits of advanced information and communications technologies.

13. Broadband services are not regulated by the Commission, but the Commission has discretion to ensure continued public benefits from the deployment of broadband services.

14. Cal-Ore does not have any outstanding loans currently with the RUS.

15. Cal-Ore's parent, California Oregon Telecommunications Company, committed to provide access to COC's books and records to facilitate the Commission's regulatory oversight.

16. Section 818 and RUS require this Commission's approval of the RUS loan.

17. The inability to secure approval of the RUS loan could jeopardize the receipt by Cal-Ore of the BIP grant.

18. The construction costs to be funded partly with Cal-Ore's proposed RUS loan are shown in Table 2 of this Decision.

19. RUS requires a security interest in Cal-Ore's assets.

20. RUS imposes conditions to ensure completion of the Project.

21. In Resolution ALJ 176-3264, dated November 19, 2010, the Commission preliminarily categorized this Application as ratesetting, and preliminarily determined that hearings were not necessary.

22. Cal-Ore must comply with all environmental permitting requirements applicable to the construction and improvements that it will undertake in conjunction with this proceeding.

23. Res. F-616 specifically exempts debt issues of $20 million or less from the Commission's Competitive Bidding Rule.

24. General Order 24-B requires utilities to submit a monthly report to the Commission that contains, among other things: (i) the amount of debt and preferred stock issued by the utility during the prior month; (ii) the total amount of debt and equity securities outstanding at the end of the prior month; (iii) the purposes for which the utility expended the proceeds realized from the issuance of debt and equity securities during the prior month; and (iv) a monthly statement of the separate bank account that the utility is required to maintain for all receipts and disbursements of money obtained from the issuance of debt and equity securities.

25. The Commission has routinely required utilities to maintain records to

(i) identify the specific long-term debt issued; and (ii) demonstrate that the proceeds from such debt have been used only for authorized purposes.

26. The Commission has routinely required utilities to keep and maintain copies of the debt agreements and within fifteen days of execution provide copies to UAFCB.

27. On November 10, 2010, Cal-Ore served its Application on its service list.

28. Notice of the filing of the Application appeared on the Commission's Daily Calendar on November 12, 2010. No protests have been received.

29. The fee for this financing authority as required by § 1904(b) is $893.

Conclusions of Law

1. The BIP loan and grant are for facilities for services that are not regulated by this Commission but that may provide ancillary benefits to Cal-Ore's regulated telephone service.

2. The project costs are not reasonably chargeable to Cal-Ore's expenses or income.

3. Section 281 encourages the deployment of high-quality advance communications services in unserved and underserved areas in California to promote economic growth, job creation, and the substantial benefits of advanced information and communications technologies.

4. It is not adverse to the public interest to authorize Cal-Ore to enter into the Agreement with the RUS for the loan and the grant to finance the construction discussed in Table 2.

5. It is not adverse to the public interest to allow Cal-Ore to provide a security interest in and to all of Cal-Ore's property and execute related agreement in conjunction with the loan and the grant.

6. It is not adverse to the public interest to allow Cal-Ore to assign the proceeds of the loan and grant, and the property constructed therewith to Cal-Ore Communications, Inc., its affiliate.

7. The loan authorization herein is not a finding of the reasonableness of Cal-Ore's proposed construction plan or expenditures, any cost allocations between regulated and non-regulated services, or the cost of money, nor does it indicate approval of matters subject to review in general rate case of other proceedings.

8. Cal-Ore should be authorized to execute the Agreement and encumber its property to secure the debt authorized herein so long as the debt is to be used solely for the Project specifically described in the RUS approved application.

9. Cal-Ore should file a Tier 2 advice letter before it assigns the loan, the grant and the property to COC.

10. Cal-Ore should follow-up with the RUS its request for modification of the security interest or secure a resolution of the matter for purposes of future debt requirements.

11. Cal-Ore's proposed loan is exempt from the Commission's Competitive Bidding Rule.

12. Consistent with § 824, Cal-Ore should maintain records to (i) identify the specific long-term debt issued pursuant to this order, and (ii) demonstrate that the proceeds from such debt have been used only for the purposes authorized herein.

13. Cal-Ore should provide the Commission with the monthly reports required by General Order 24-B.

14. For purposes of this proceeding, Cal-Ore's parent company California-Oregon Telecommunications Company should provide the Commission access to COC's books and records to facilitate the Commission's regulatory oversight.

15. A public hearing is not necessary.

16. In order for Cal-Ore to obtain the federal funding, today's order should be made effective immediately.

ORDER

IT IS ORDERED that:

30. On or after the effective date of this decision, Cal-Ore Telephone Company is authorized to:

a) In conjunction with its affiliate, Cal-Ore Communications, Inc., enter into a loan agreement with the United States of America, acting through the Rural Utilities Service for the purpose of borrowing $446,600 under the Broadband Initiative Program, as authorized by the American Recovery and Reinvestment Act of 2009, to fund the construction of a broadband infrastructure project in north central Siskiyou County, California;

b) Execute and deliver the Loan/Grant and Security Agreement and all related documents required for the completion of the loan;

c) Encumber its assets in connection with the loan; and

d) Assign the proceeds of the loan and grant, and the property constructed therewith to Cal-Ore Communications, Inc.

31. Cal-Ore Telephone Company must notify the Commission's Utility Audit, Finance and Compliance Branch in writing within 15 days of completion of the broadband infrastructure project.

32. Cal-Ore Telephone Company's loan authorized herein is exempt from the Commission's Competitive Bidding Rule.

33. Cal-Ore Telephone Company must maintain records to (i) identify the specific long-term debt issued pursuant to this decision, and (ii) demonstrate that the proceeds from such debt have been used only for the purposes authorized by this decision.

34. Cal-Ore Telephone Company must keep and maintain copies of the Loan/Grant and Security Agreement and all related documents and must file with the Division of Water and Audits' Utility Audit, Finance and Compliance Branch a copy of the documents within 15 days of execution.

35. Cal-Ore Telephone Company must file, in accordance with General Order No. 96-B, within 60 days from the date of completion of the construction of the broadband infrastructure project, a Tier 2 advice letter which indicates the assignment of the loan, assets, and affiliate transactions to Cal-Ore Communications, Inc.

36. California-Oregon Telecommunications Company must provide the Division of Water and Audits' Utility Audit, Finance and Compliance Branch access to Cal-Ore Communications, Inc.'s books and records pertaining to the debt authorized in this Decision and its affiliate transactions with Cal-Ore Telephone Company within 15 days of a request. This commitment remains in effect in the event of any changes in ownership of any of the involved companies.

37. California-Oregon Telephone Company must renew its request to the Rural Utilities Service for modification of the security interest in its assets, and must notify the Division of Water and Audit's Utility Audit, Finance and Compliance Branch within 15 days of the final disposition of the matter.

38. On or before the 25th day of each month, Cal-Ore Telephone Company must file with the Division of Water and Audit's Utility Audit, Finance & Compliance Branch the reports required by General Order 24-B. When the full amount of the loan has been received and reported, and the system improvements completed and all the capital expenditures reported, the General Order 24-B reporting requirement terminates.

39. The authority granted by this decision becomes effective when Cal-Ore Telephone Company pays $893 as required by Public Utilities Code § 1904(b). Cal-Ore Telephone Company must issue the check payable to the California Public Utilities Commission and remit the payment to the Commission's Fiscal Office.

40. Application 10-11-008 is closed.

This order is effective today.

Dated June 9, 2011, at San Francisco, California.

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