COM/GFB/eam* ALTERNATE DRAFT Agenda ID #4873

Alternate to Agenda ID #4819

Ratesetting

10/6/05 Item 19a

Decision _____________

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking on the Commission's Own Motion to Assess and Revise the New Regulatory Framework for Pacific Bell and Verizon California Incorporated.	Rulemaking 01-09-001 (Filed September 6, 2001)
Order Instituting Investigation on the Commission's Own Motion to Assess and Revise the New Regulatory Framework for Pacific Bell and Verizon California Incorporated.	Investigation 01-09-002 (Filed September 6, 2001)

DECISION REGARDING PETITIONS TO MODIFY DECISION 02-10-020

OPINION 2

1. Summary 2

2. Procedural Background 2

3. Regulatory Background 3

4. ORA & TURN's Joint Petition to Modify D.02-10-020 4

A. Summary of the Joint Petition 4

B. SBC's and Verizon's Responses 4

5. Verizon's Petition to Modify D.02-10-020 5

A. Summary of Verizon's Petition 5

B. ORA & TURN's Joint Response 7

C. SBC's Response 8

6. Discussion 8

A. ORA & TURN's Joint Petition to Modify D.02-10-020 8

B. Verizon's Petition to Modify D.02-10-020 10

i. Scope of the Audit 10

ii. The Years Covered by the Audit 13

iii. Revisions to the Audit Scope in Phase 3 13

7. Comments on the Alternate Draft Decision 14

8. Assignment of Proceeding 14

Findings of Fact 14

Conclusions of Law 16

ORDER 17

OPINION

1. Summary

Decision (D.) 02-10-020 ordered the Office of Ratepayer Advocates (ORA) to conduct a comprehensive audit of Verizon California Inc. (Verizon) covering the years 1999 through 2002.¹ Today's Decision grants the joint petition to modify D.02-10-020 filed by ORA and The Utility Reform Network (TURN), and denies the petition to modify D.02-10-020 filed by Verizon. In response to these petitions, D.02-10-020 is modified to (1) expand ORA's audit of Verizon to include the years 2003 and 2004, and (2) postpone the start of ORA's audit until after the conclusion of Phase 3 of this proceeding or Application (A.) 05-04-020,² whichever is later. The Commission will consider in Phase 3 whether to cap the cost of ORA's audit and whether to modify the audit as set forth herein.

¹ D.02-10-020, mimeo., p. 83 [Ordering Paragraph (OP) 8].

² A 05-04-020 requests Commission approval of a proposed merger of Verizon Communications Inc. and MCI, Inc.