8. Assignment of Proceeding

Catherine J.K. Sandoval is the assigned Commissioner and Seaneen M. Wilson is the assigned ALJ in this proceeding.

1. On November 14, 2011, SureWest filed a petition for rulemaking pursuant to Pub. Util. Code § 1708.5, requesting that the Commission initiate a rulemaking to address exemption of URF ILECs from the requirement that they obtain prior Commission approval pursuant to § 851 to encumber all public utility assets for the purpose of securing debt.

2. The DRA protested this petition on December 27, 2011, to which SureWest replied on December 27, 2011.

3. In A.06-07-026, AT&T requested authority for full exemption from § 851 for the disposition or encumbrance of necessary and useful assets, which was supported by SureWest and Verizon. In D.07-11-048 in that proceeding, we denied the request by AT&T for full exemption from § 851, but extended relief from the requirements of § 851, subject to certain limitations, to all of the URF ILECs. We also deferred consideration of full exemption by URF ILECs from § 851 to a rulemaking.

4. In R.09-05-006, we considered, among other issues, the full exemption of both mid-size and large URF ILECs from § 851 with regard to the disposition or encumbrance of necessary and useful utility assets. By D.10-05-019 in that rulemaking, we granted URF ILECs further exemptions from § 851 with respect to the disposition of certain non-controversial assets, but did not grant them full exemption from § 851.

5. In D.11-10-013, we offered SureWest several alternatives for resolving its concern that it could not "nimbly" react to changes in the market, including: petition for modification of a decision in an applicable rulemaking; petition for rulemaking; or file an application to request authority to encumber assets prior to its being necessary, giving it the ability to react to changes in the market.

1. Opening a rulemaking to resolve SureWest's concerns would require the time and effort of the Commission, the petitioner, and interested parties (such as all URF ILECs, DRA, CD, and ALJ Division).

2. If, as a result of a rulemaking, the URF ILECs were authorized an exemption from § 851, the Commission would then not have the opportunity to properly review the effect of any proposed encumbrance of utility assets on ratepayers; in particular, what the effect would be if an URF ILEC eventually defaulted on the secured debt for which the assets were encumbered.

3. The filing of an application for authority to encumber assets (another option provided to them in D.11-11-030), would: not be an unduly cumbersome process to the applicant, the utility, or the Commission; involve fewer parties; require much less time and effort to process; and would retain a venue for the Commission to properly review the effect of any requested encumbrance.

4. A much more efficient and straightforward, solution to SureWest's concerns regarding § 851 is for URF ILECs to simply request authority via an application to encumber utility assets prior to its being necessary, as a shelf authority.

5. By requesting § 851 authority prior to the URF ILEC approaching a lender to issue debt, any disadvantages of having to request such authority (such as timing and freedom to take advantage of changes in the credit market) are greatly mitigated.

6. Petition 11-11-012 is not in the public interest and should be denied.

7. Petition 11-11-012 should be closed.

ORDER

IT IS ORDERED that:

1. Petition 11-11-012 is denied.

2. Petition 11-11-012 is closed.

This order is effective today.

Dated April 19, 2012, at San Francisco, California.

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