D - NOI

Appendix D

Summary of Adopted Adjustments to Net Operating Income (NOI) - Pacific Bell Intrastate Regulated Operations

Phases 2A and 2B

Adopted Adjustments to NOI ¹

1997

1998

1999

Total

Reference

Phase 2A

References to Phase 2A Decision except as noted.

1.

Pension Trust Fund Withdrawal

-

-

$40,737,000

$40,737,000

Exhibit Phase 2A: 409, Table 7 of 7

2.

SFAS 106 - Regulatory Asset Write-Off

-

$165,636,000

-

$165,636,000

Appendix F

3.

SFAS 106 - VEBA 3 to VEBA 5 Transfer

$5,829,000

$35,559,000

-

$41,388,000

Appendix H

4.

SFAS 106 - Prefunded Contributions - TBO Amortization ²

-

25,686,000

$4,281,000

$29,967,000

Appendix I

5.

Income Tax Flow Through - Phase 2A Issues

($13,753,000)

$58,438,000

$196,681,000

$241,366,000

Appendix J, Column L

6.

Subtotal Phase 2A

($7,924,000)

$285,319,000

$241,699,000

$519,094,000

References to Phase 2B Decision, Appendix A, except as noted.

Phase 2B

7.

SBC Ops. SFAS 106 Merger Conforming Expense

-

-

$1,656,603

$1,656,603

Index No. 39

8.

AMDOC Awards SBC Operations

-

-

$252,655

$252,655

Index No. 40

9.

SBC Ops. Excess Executive Compensation

-

$481,010

$625,082

$1,106,092

Index No. 41

10.

SBC Ops. Sec. Allocation of Parent Mgt. Fees

-

$291,835

$270,743

$562,578

Index No. 42

11.

SBC Ops. Call Ctr. Deprec., Merger Implement. Expense

-

$237,025

-

$237,025

Index No. 43

12.

SBC Srvcs. Excess Executive Compensation

-

$162,893

$134,581

$297,474

Index No. 44

13.

SBC Srvcs., CFL, TRI Sec. Alloc. of Parent Mgt. Fees

-

$265,789

$216,392

$482,181

Index No. 45

14.

Parent Excess Executive Compensation

$1,472,683

$6,834,760

$7,089,914

$15,397,357

Index No. 46

15.

Parent Political and Legislative Influence Expense

$8,574,885

$10,009,837

$4,186,554

$22,771,276

Index No. 47

16.

Parent Legal Expense

-

$438,876

$212,061

$650,937

Index No. 48

17.

Parent Public Relations & Corp. Sponsorship Expense

$1,700,568

$8,583,357

$8,818,057

$19,101,982

Index No. 49

18.

Parent Corporate Development Expense

-

$3,068,824

$3,506,106

$6,574,930

Index No. 50

19.

Parent Strategic Planning Expense

$1,675,592

$532,041

$409,813

$2,617,446

Index No. 51

20.

Parent Contributions, Memberships, Foundation Expense

$161,013

$657,620

($3,067,831)

($2,249,198)

Index No. 52

21.

Parent Out of Period Expense

($3,442,873)

$3,360,784

-

($82,089)

Index No. 53

22.

Parent Merger Conforming Expense

-

-

$454,553

$454,553

Index No. 54

23.

Parent Impact of Adjustmts. on Billings to PacBell Direct.

$770,974

$3,914,927

$4,453,797

$9,139,698

Index No. 55

24.

MSI USA Excess Executive Comp. Billed Directly

-

-

$2,001,766

$2,001,766

Index No. 56

25.

Parent PB Employee Transfer Fees Billed to PacBell

$626,616

-

-

$626,616

Index No. 57

26.

Nevada Bell Net Directory Revenue

-

-

($11,253,000)

($11,253,000)

Index No. 59

27.

TRI Expense

-

$11,127,125

$9,225,599

$20,352,724

Line No. 21

28.

Depreciation Expense Timing Adjustment

-

-

$1,728,488

$1,728,488

Index No. 60b

29.

Advertising Direct Assignment and Common Allocations

-

$1,930,885

$1,752,588

$3,683,473

Index No. 61

30.

Customer Service Non-Productive Salary Allocations

($1,039,093)

($3,366,101)

($4,813,537)

($9,218,731)

Index No. 62

31.

Affiliate Marketing Services Revenue

-

$3,235,271

$13,689,808

$16,925,079

Index No. 63

32.

Non-regulated Tracking Code Direct Assignment Errors

$7,398

$4,250,163

$3,237,874

$7,495,435

Index No. 64

33.

National-Local Strategy Implementation

-

-

$3,695,373

$3,695,373

Index No. 65

34.

1997 Corporate Sponsorship Costs

$1,014,546

-

-

$1,014,546

Index No. 66

35.

Customer Premise Equipment Costs

-

$10,097,537

$3,467,830

$13,565,367

Index No. 67

36.

Unsupported Contingent Liabilities - Revenues

$23,976,238

-

-

$23,976,238

Index No. 1

37.

Bellcore Dividends

$3,883,507

-

-

$3,883,507

Index No. 2

38.

Uncollect. Revenues - RCRMS (PacBell repts. flows thru)

$53,533,000

-

-

$53,533,000

Index No. 3

39.

Gain on Sale of Bellcore

$9,122,587

-

-

$9,122,587

Index No. 4

40.

Local Number Portability Costs

$51,313,964

$27,904,486

$22,306,761

$101,525,211

Index No. 5

41.

Local Competition Costs

$24,278,763

$4,718,957

-

$28,997,720

Phase 2A Decision, Appendix K

42.

Merger Savings

-

$2,488,668

2,488,668

$4,977,336

Index No. 7

43.

Advanced Communications Network

$17,846,219

$4,284,040

$2,226,486

$24,356,745

Index No. 8

44.

Software Buy-Out Agreement

-

-

$26,347,581

$26,347,581

Index No. 9

45.

Unsupported Contingent Liabilities - Operating Expense

$52,834,609

$1,134,101

$6,971,314

$60,940,024

Index No. 10

46.

Incentive Pay Accrual

$20,355,921

($24,140,020)

$20,775,097

$16,990,998

Index No. 11

47.

ISP-Bound Traffic Separations

($11,329,359)

-

-

($11,329,359)

Index No. 12

48.

Uncollectible Settlements - RCRMS

$16,614,105

$7,809,938

$511,880

$24,935,922

Index No. 13

49.

SFAS 112

$5,684,918

-

-

$5,684,918

Index No. 16

50.

Intrabuilding Cable Amortization

$19,473,832

$16,611,028

-

$36,084,860

Index No. 17

51.

SAVR Delayed Retirements

$5,906,945

4,236,207

-

$10,143,152

Index No. 18

52.

SAVR Reverse Retirements

$271,567

615,253

$2,344,456

$3,231,276

Index No. 19

53.

Equal Access IEMR Ratemaking Adjustment

-

(6,477,055)

-

($6,477,055)

Index No. 20

54.

Ameritech Income Tax Misclassification

-

-

$8,001,866

$8,001,866

Index No. 22

55.

Excess Deferred Income Tax

-

$29,624,090

$29,671,332

$59,295,422

Index No. 24

56.

Sales and Use Tax Accrual

$460,647

$457,024

($1,425,307)

($507,636)

Index No. 25

57.

Employment Tax Error

-

-

$4,345,305

$4,345,305

Index No. 26

58.

PIU Accrual

($8,694,340)

-

-

($8,694,340)

Index No. 68

59.

USOA Re-write Turnaround Accrual

($13,701,303)

-

-

($13,701,303)

Index No. 69

60.

LNP Depreciation

$687,346

$1,586,822

$2,516,517

$4,790,685

Index No. 70b

61.

AFUDC

$105,472

$388,706

$507,214

$1,001,392

Index No. 71

62.

Income Tax Flow Through - Phase 2B Issues

$9,325,000

$85,117,000

($64,903,000)

$29,539,000

Phase 2A Decision, App. J, Column M

63.

Subtotal Phase 2B

293,471,947

222,473,703

$114,638,039

$630,583,689

64.

Total Phase 2A and 2B

$285,547,947

$507,792,703

$356,337,039

$1,149,677,689

Note 1: All amounts are after-tax (normalized) revenues or expenses, except for the adjustment for flow-through tax accounting, which represents the effect of using flow-through tax accounting instead of normalized tax accounting with respect to Phase 2A and 2B issues that do not result in an audit adjustment.

Note 2: No TBO adjustment for 1997 because the SFAS 106 costs recognized for CPUC purposes during 1997 were limited to tax-deductible contributions, making it unnecessary to revise SFAS 106 costs reported during 1997 to reflect the corrected TBO.


	Appendix D

	Summary of Adopted Adjustments to Net Operating Income (NOI) - Pacific Bell Intrastate Regulated Operations
	Phases 2A and 2B


	Adopted Adjustments to NOI ¹	1997	1998	1999	Total	Reference
	Phase 2A					References to Phase 2A Decision except as noted.
1.	Pension Trust Fund Withdrawal	-	-	$40,737,000	$40,737,000	Exhibit Phase 2A: 409, Table 7 of 7
2.	SFAS 106 - Regulatory Asset Write-Off	-	$165,636,000	-	$165,636,000	Appendix F
3.	SFAS 106 - VEBA 3 to VEBA 5 Transfer	$5,829,000	$35,559,000	-	$41,388,000	Appendix H
4.	SFAS 106 - Prefunded Contributions - TBO Amortization ²	-	25,686,000	$4,281,000	$29,967,000	Appendix I
5.	Income Tax Flow Through - Phase 2A Issues	($13,753,000)	$58,438,000	$196,681,000	$241,366,000	Appendix J, Column L
						Appendix J, Column L
6.	Subtotal Phase 2A	($7,924,000)	$285,319,000	$241,699,000	$519,094,000
						References to Phase 2B Decision, Appendix A, except as noted.
	Phase 2B
7.	SBC Ops. SFAS 106 Merger Conforming Expense	-	-	$1,656,603	$1,656,603	Index No. 39
8.	AMDOC Awards SBC Operations	-	-	$252,655	$252,655	Index No. 40
9.	SBC Ops. Excess Executive Compensation	-	$481,010	$625,082	$1,106,092	Index No. 41
10.	SBC Ops. Sec. Allocation of Parent Mgt. Fees	-	$291,835	$270,743	$562,578	Index No. 42
11.	SBC Ops. Call Ctr. Deprec., Merger Implement. Expense	-	$237,025	-	$237,025	Index No. 43
12.	SBC Srvcs. Excess Executive Compensation	-	$162,893	$134,581	$297,474	Index No. 44
13.	SBC Srvcs., CFL, TRI Sec. Alloc. of Parent Mgt. Fees	-	$265,789	$216,392	$482,181	Index No. 45
14.	Parent Excess Executive Compensation	$1,472,683	$6,834,760	$7,089,914	$15,397,357	Index No. 46
15.	Parent Political and Legislative Influence Expense	$8,574,885	$10,009,837	$4,186,554	$22,771,276	Index No. 47
16.	Parent Legal Expense	-	$438,876	$212,061	$650,937	Index No. 48
17.	Parent Public Relations & Corp. Sponsorship Expense	$1,700,568	$8,583,357	$8,818,057	$19,101,982	Index No. 49
18.	Parent Corporate Development Expense	-	$3,068,824	$3,506,106	$6,574,930	Index No. 50
19.	Parent Strategic Planning Expense	$1,675,592	$532,041	$409,813	$2,617,446	Index No. 51
20.	Parent Contributions, Memberships, Foundation Expense	$161,013	$657,620	($3,067,831)	($2,249,198)	Index No. 52
21.	Parent Out of Period Expense	($3,442,873)	$3,360,784	-	($82,089)	Index No. 53
22.	Parent Merger Conforming Expense	-	-	$454,553	$454,553	Index No. 54
23.	Parent Impact of Adjustmts. on Billings to PacBell Direct.	$770,974	$3,914,927	$4,453,797	$9,139,698	Index No. 55
24.	MSI USA Excess Executive Comp. Billed Directly	-	-	$2,001,766	$2,001,766	Index No. 56
25.	Parent PB Employee Transfer Fees Billed to PacBell	$626,616	-	-	$626,616	Index No. 57
26.	Nevada Bell Net Directory Revenue	-	-	($11,253,000)	($11,253,000)	Index No. 59
27.	TRI Expense	-	$11,127,125	$9,225,599	$20,352,724	Line No. 21
28.	Depreciation Expense Timing Adjustment	-	-	$1,728,488	$1,728,488	Index No. 60b
29.	Advertising Direct Assignment and Common Allocations	-	$1,930,885	$1,752,588	$3,683,473	Index No. 61
30.	Customer Service Non-Productive Salary Allocations	($1,039,093)	($3,366,101)	($4,813,537)	($9,218,731)	Index No. 62
31.	Affiliate Marketing Services Revenue	-	$3,235,271	$13,689,808	$16,925,079	Index No. 63
32.	Non-regulated Tracking Code Direct Assignment Errors	$7,398	$4,250,163	$3,237,874	$7,495,435	Index No. 64
33.	National-Local Strategy Implementation	-	-	$3,695,373	$3,695,373	Index No. 65
34.	1997 Corporate Sponsorship Costs	$1,014,546	-	-	$1,014,546	Index No. 66
35.	Customer Premise Equipment Costs	-	$10,097,537	$3,467,830	$13,565,367	Index No. 67
36.	Unsupported Contingent Liabilities - Revenues	$23,976,238	-	-	$23,976,238	Index No. 1
37.	Bellcore Dividends	$3,883,507	-	-	$3,883,507	Index No. 2
38.	Uncollect. Revenues - RCRMS (PacBell repts. flows thru)	$53,533,000	-	-	$53,533,000	Index No. 3
39.	Gain on Sale of Bellcore	$9,122,587	-	-	$9,122,587	Index No. 4
40.	Local Number Portability Costs	$51,313,964	$27,904,486	$22,306,761	$101,525,211	Index No. 5
41.	Local Competition Costs	$24,278,763	$4,718,957	-	$28,997,720	Phase 2A Decision, Appendix K
42.	Merger Savings	-	$2,488,668	2,488,668	$4,977,336	Index No. 7
43.	Advanced Communications Network	$17,846,219	$4,284,040	$2,226,486	$24,356,745	Index No. 8
44.	Software Buy-Out Agreement	-	-	$26,347,581	$26,347,581	Index No. 9
45.	Unsupported Contingent Liabilities - Operating Expense	$52,834,609	$1,134,101	$6,971,314	$60,940,024	Index No. 10
46.	Incentive Pay Accrual	$20,355,921	($24,140,020)	$20,775,097	$16,990,998	Index No. 11
47.	ISP-Bound Traffic Separations	($11,329,359)	-	-	($11,329,359)	Index No. 12
48.	Uncollectible Settlements - RCRMS	$16,614,105	$7,809,938	$511,880	$24,935,922	Index No. 13
49.	SFAS 112	$5,684,918	-	-	$5,684,918	Index No. 16
50.	Intrabuilding Cable Amortization	$19,473,832	$16,611,028	-	$36,084,860	Index No. 17
51.	SAVR Delayed Retirements	$5,906,945	4,236,207	-	$10,143,152	Index No. 18
52.	SAVR Reverse Retirements	$271,567	615,253	$2,344,456	$3,231,276	Index No. 19
53.	Equal Access IEMR Ratemaking Adjustment	-	(6,477,055)	-	($6,477,055)	Index No. 20
54.	Ameritech Income Tax Misclassification	-	-	$8,001,866	$8,001,866	Index No. 22
55.	Excess Deferred Income Tax	-	$29,624,090	$29,671,332	$59,295,422	Index No. 24
56.	Sales and Use Tax Accrual	$460,647	$457,024	($1,425,307)	($507,636)	Index No. 25
57.	Employment Tax Error	-	-	$4,345,305	$4,345,305	Index No. 26
58.	PIU Accrual	($8,694,340)	-	-	($8,694,340)	Index No. 68
59.	USOA Re-write Turnaround Accrual	($13,701,303)	-	-	($13,701,303)	Index No. 69
60.	LNP Depreciation	$687,346	$1,586,822	$2,516,517	$4,790,685	Index No. 70b
61.	AFUDC	$105,472	$388,706	$507,214	$1,001,392	Index No. 71
62.	Income Tax Flow Through - Phase 2B Issues	$9,325,000	$85,117,000	($64,903,000)	$29,539,000	Phase 2A Decision, App. J, Column M

63.	Subtotal Phase 2B	293,471,947	222,473,703	$114,638,039	$630,583,689
64.	Total Phase 2A and 2B	$285,547,947	$507,792,703	$356,337,039	$1,149,677,689

	Note 1: All amounts are after-tax (normalized) revenues or expenses, except for the adjustment for flow-through tax accounting, which represents the effect of using flow-through tax accounting instead of normalized tax accounting with respect to Phase 2A and 2B issues that do not result in an audit adjustment.
	Note 2: No TBO adjustment for 1997 because the SFAS 106 costs recognized for CPUC purposes during 1997 were limited to tax-deductible contributions, making it unnecessary to revise SFAS 106 costs reported during 1997 to reflect the corrected TBO.