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Item #5
Agenda ID # 6131
12/14/06
DRAFT
PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Telecommunications Division |
RESOLUTION T- 17064 |
Public Programs Branch * |
December 14, 2006 |
R E S O L U T I O N
Resolution T-17064 Seventeen Small Local Exchange Carriers (LECs) and the California High Cost Fund-A (CHCF-A) Administrative Committee Fund.
This Resolution Sets Forth The CHCF-A Support For Each of the 17 Small LECs For Calendar Year (CY) 2007.
BY ADVICE LETTER NO. |
FILED BY: |
DATE FILED: | |
293 |
Calaveras Telephone Company |
(Calaveras) |
9/29/2006 |
314 |
California-Oregon Telephone Company |
(Cal-Ore) |
9/29/2006 |
191 |
Citizens Telecommunications Company of the Golden State |
(Citizens-GS) |
9/25/2006 |
180 |
Citizens Telecommunications Company of Tuolumne |
(Citizens-Tu) |
9/25/2006 |
312 |
Ducor Telephone Company |
(Ducor) |
9/29/2006 |
385 |
Global Valley Networks, Inc. |
(Global Valley) |
9/29/2006 |
271 |
Foresthill Telephone Company |
(Foresthill) |
9/29/2006 |
292 |
Happy Valley Telephone Company |
(Happy Valley) |
10/2/2006 |
260 |
Hornitos Telephone Company |
(Hornitos) |
9/29/2006 |
351 |
Kerman Telephone Company |
(Kerman) |
9/29/2006 |
224 |
Pinnacles Telephone Company |
(Pinnacles) |
9/29/2006 |
359 |
The Ponderosa Telephone Company |
(Ponderosa) |
9/29/2006 |
349 |
Sierra Telephone Company |
(Sierra) |
9/28/2006 |
341 |
Siskiyou Telephone Company |
(Siskiyou) |
9/27/2006 |
665 |
Verizon West Coast Incorporated |
(Verizon-WC) |
10/2/06 |
334 |
Volcano Telephone Company |
(Volcano) |
9/29/2006 |
188 |
Winterhaven Telephone Company |
(Winterhaven) |
10/2/2006 |
Summary
This resolution adopts a total CY 2007 California High Cost Fund-A (CHCF-A) support of $28,370,801.08 for Calaveras, Cal-Ore, Citizens-GS, Citizens-Tu, Ducor, Global Valley Networks, Inc., Foresthill, Happy Valley, Hornitos, Kerman, Pinnacles, Ponderosa, Sierra, Siskiyou, Verizon-WC, Volcano, and Winterhaven. The amount due to Foresthill under this resolution is limited to recovery of prior years lost revenue due to the Federal Communications Commission (FCC) Declaratory Ruling and Report and Order in its Intercarrier Compensation Docket (CC Docket No. 01-92) (the T-Mobile Decision)1. Foresthill's CHCF-A 2007 funding support is not included in this resolution since this will be addressed in the resolution covering their General Rate Case filing. The development of the CHCF-A support for each small LEC is shown in Appendix A and explained in the Discussion section. The table below summarizes the monthly and yearly CHCF-A support for each of the 17 small LECs:

This resolution directs the Telecommunications Division (TD) in concert with the Information and Management Services Division (IMSD) to pay the respective small LECs monthly support as indicated above within 30 days after the close of each calendar month. The prompt payment of monthly support to the small LECs is contingent on the availability of funds and the Commission and State adoption of the budgets covering the payment of the 2007 CHCF-A support. Should the monthly support payments due the small LECs not be paid within 30 days after the close of each calendar month, TD shall include in those payments interest equal to the 3-month commercial paper rate. 2
The California High Cost Fund (HCF) was implemented by D.88-07-022, as modified by D.91-05-016 and D.91-09-042, to provide a source of supplemental revenues to three mid-size and seventeen small Local Exchange Carriers (LECs) whose basic exchange access line service rates would otherwise be increased to levels that would threaten universal service. Pacific Bell was appointed as the administrator of the fund. Recognizing the public nature of the fund, Pacific set up a separate trust for the CHCF-A.
D.96-10-066 changed the name of HCF to CHCF-A and created the California High Cost Fund-B (CHCF-B). This decision included Pacific Bell (now SBC), GTE California Incorporated (now Verizon)3, Roseville Telephone Company (now SureWest), and Citizens Telecommunications Company of California, Incorporated in the CHCF-B for the purpose of determining universal service subsidy support and maintained the CHCF-A for the 17 small LECs. This decision also directed the Commission to take over the administration of the CHCF-A from Pacific.
Resolution T-16092 approved the transfer of the administrative control of the CHCF-A from Pacific to the Commission effective January 1, 1998. This resolution appointed three Commission staff members as committee members of the CHCF-A Trust Administrative Committee charged with the responsibility of administering the CHCF-A on behalf of the Commission. D.98-06-065 renamed the committee as CHCF-A AC and revised the governance of the CHCF-A consistent with State rules and procedures.
In October 1999, PU Code § 270-281 were codified as a result of the enactment of Senate Bill (SB) 669 (Stats. 1999, Chapter 677). § 270(b) requires that the monies in the CHCF-A and five other funds may only be expended pursuant to § 270-281 and upon appropriation in the annual Budget Act. Since FY 2001-02, the CHCF-A Fund expenditures have been authorized in the State's Annual Budget Act.
D.01-09-064 revised the charter of CHCF-AC to conform to SB 669, and D.02-04-059 established a three-member board for the CHCF-AC.
On or about October 1, 2006, 17 small LECs made their annual CHCF-A advice letter filings in accordance with D.91-09-042. These 17 small LECs requested a total CY 2007 CHCF-A support in excess of $32 million.
Notice/Protests
The 17 small LECs' 2007 CHCF-A advice letter filings appeared in the Commission's Daily Calendar in October 2006. No protests to the advice letter filings have been received.
Discussion
TD in concert with the IMSD shall make the monthly support payments within 30 days after the close of each calendar month.4 In the event that the monthly support payments due to the small LECs are not paid within 30 days after the close of each calendar month, TD shall include in those payments interest equal to the 3-month commercial paper rate.
A. 2007 CHCF-A Revenue Requirements and Supports
TD reviewed the advice letter filings made by the 17 small LECs in connection with the 2007 CHCF-A revenue requirements and revised their requests for the following reasons and discussed below:
1. pursuant to guidelines adopted in D.88-07-0225; and
2. incorrect determination of the Net Interstate Expense Adjustment.
Specific implementation rules and Commission orders that guided TD's revisions include, but are not limited to, the following:
General Rate Cases (GRCs)
Kerman, Sierra and Volcano informed the Commission in their AL filings of their intent to file a GRC before the end of 2006. Siskiyou's latest GRC filing was in 2005 for test year 2006. Foresthill filed a GRC in 2005 for test year 2007. Calaveras, Cal-Ore, Ducor, Pinnacles and Ponderosa filed their GRCs for test year 2004. Global Valley filed its GRCs for test year 2003. Citizens - Golden State, Citizens- Tuolumne, Happy Valley, Hornitos, Verizon - West Coast and Winterhaven's last GRC filing was for test year 1997.
In the 1997, 2003, 2004, 2006, and 2007 test year GRCs, the carriers were authorized a 10% rate of return.
Means Test
§ B of the Implementation Rules requires that each CHCF-A support request be subject to a means test, i.e. a small LEC's CHCF-A support is limited to forecasted intrastate results of operations not to exceed the small LEC's authorized rate of return. The forecasted earnings shall be based on at least seven months of recorded financial data, annualized for the year in which the advice letter is filed. D. 91-09-042 also provides that the means test is not required in determining an LEC's CHCF-A funding 12 months after a decision or resolution is rendered by the Commission in a General Rate Case proceeding.
Waterfall
Pursuant to § D of the Implementation Rules, the phase down of the CHCF-A funding level is reinitiated effective January 1 following the year after the completion of a GRC. The funding levels are 100% for the first 3 years, 80% the fourth year, 50% the fifth year, and 0% thereafter. This 6-year phase down of funding level is known as the Waterfall.
The funding levels for the 17 small LECs for 2007 are summarized below:
Small ILEC |
GRC Test Year |
2007 |
Calaveras |
2004 |
100% |
Cal-Ore |
2004 |
100% |
Citizens-GS |
1997 |
0% |
Citizens-Tu |
1997 |
0% |
Ducor |
2004 |
100% |
Global Valley |
2003 |
80% |
Foresthill |
1997 |
0% |
Happy Valley |
1997 |
0% |
Hornitos |
1997 |
0% |
Kerman |
2008 |
100% |
Pinnacles |
2004 |
100% |
Ponderosa |
2004 |
100% |
Sierra |
2008 |
100% |
Siskiyou |
2007 |
100% |
Verizon-WC |
1997 |
0% |
Volcano |
2008 |
100% |
Winterhaven |
1997 |
0% |
Net Interstate Expense Adjustment
§ B of the Implementation Rules authorizes the small LECs to include the changes of their federal Universal Service Fund (USF) funding in the annual CHCF-A filings. Pursuant to Resolution T-16117, the change of USF funding level shall be determined by the difference between the forecasted USF support for the current year and the forecasted USF support for the coming year. The current year's forecasted USF support is the amount adopted by the Commission for the current year CHCF-A revenue requirement. The coming year's forecasted USF is the amount projected by the National Exchange Carrier Association (NECA), the administrator of USF.6
Revenue Effect Associated with Wireless Intercarrier Compensation
Paragraph B of Appendix A of Decision 91-05-016 allows the inclusion of regulatory changes of industry-wide effect that have an impact on revenues issued by the Commission and FCC. In the small LECs filing for the 2006 CHCF-A funding, the small LECs' funding request included recovery of revenues attributable to a recovery of revenue lost attributable to a decision issued by the Federal Communications Commission (FCC). On February 24, 2005, the Federal Communications Commission (FCC) released its Declaratory Ruling and Report and Order in its Intercarrier Compensation Docket (CC Docket No. 01-92) (the T-Mobile Decision). The T-Mobile Decision established new rules prohibiting LECS from imposing compensation arrangements on commercial mobile radio service providers through tariffs. Instead, the LECS must negotiate compensation arrangements with CMRS providers. In resolution T-16967, dated December 1, 2005, the Commission maintained that the impact of the FCC T-Mobile decision should be addressed in the small LECs 2006 CHCF-A filings when the results of the small LECs negotiated agreements with wireless carriers have been determined and the losses, if any, have been determined.
In the 2007 CHCF-A filing, Calaveras, Cal-Ore, Ducor, Global Valley, Foresthill, Kerman, Pinnacles, Ponderosa, Sierra, Siskiyou, and Volcano included recovery of revenues that would have been billed to the wireless carriers if not for the T-Mobile Decision. Compensation arrangements have been negotiated by these carriers with Nextel, Sprint PCS and UbiquiTel.
The CHCF-A support and the rate designs for each of the 17 small LECs for CY 2007 are summarized below. The detailed tables showing the CHCF-A support for the 17 small LECs are shown in Appendix A.
Calaveras, Page 1 of Appendix A
Calaveras has a 2007 CHCF-A revenue requirement of $746,455.73 (at Line 6, Page 1 of Appendix A). Since Calaveras projected a rate of return of less than 10% and Calaveras' waterfall is set at 100%, Calaveras will receive a monthly support of $62,204.64 for January through December 2007, i.e., one-twelfth of $746,455.73.
Cal-Ore, Page 2 of Appendix A
Cal-Ore has a 2007 CHCF-A revenue requirement of $1,194,771.96 (at Line 6, Page 2 of Appendix A). This amount is reduced after the means test to $886,297.09. Since Cal-Ore's waterfall is set at 100%, Cal-ore will receive a monthly support of $73,858.09 for January through December 2007, i.e., one-twelfth of $886,297.09.
Citizens-GS, Page 3 of Appendix A
Citizens-GS has a 2007 CHCF-A revenue requirement of $989,241.43 (at Line 6, Page 3 of Appendix A). However, the waterfall funding for Citizens-Golden State is 0%. Citizens-Golden State will not receive any CHCF-A funding for 2007.
Citizens-Tu, Page 4 of Appendix A
Citizens-Tu has a 2007 CHCF-A revenue requirement of $1,469,165.26 (at Line 6, Page 4 of Appendix A). However, due to the waterfall, Citizens-Tu is eligible for 0% of the funding level. Citizens-Tu will not receive any CHCF-A funding for 2007.
Ducor, Page 5 of Appendix A
Ducor has a 2007 CHCF-A revenue requirement of $1,746,281.35 (at Line 6, Page 5 of Appendix A). Since Ducor projected a rate of return of less than 10% and Ducor's waterfall is set at 100%, Ducor will receive a monthly support of $145,523.45 for January through December 2007, i.e., one-twelfth of $1,746,281.35.
Global Valley Networks, Inc., Page 6 of Appendix A
Global Valley has a 2007 CHCF-A revenue requirement of $4,326,741.00 (at Line 6, Page 6 of Appendix A). However, Global Valley, in Advice Letter #385 stated that they are not requesting any CHCF-A draw in 2007. Thus, Global Valley will not receive any CHCF-A support in 2007.
Foresthill, Page 7 of Appendix A
Foresthill's 2007 CHCF-A support will be resolved in a separate resolution covering their GRC filing for test year 2007. In AL 271, Foresthill requests payment of lost revenues associated with the FCC T-Mobile Decision since Foresthill did not include adjustments to cover prior year's lost revenues resulting from the FCC T-Mobile Decision. Therefore, based on their AL filing, Foresthill will receive $41,700 for 2007 in addition to the CHCF-A support determined in the Foresthill GRC resolution. The amount of $3,475 a month, i.e. one-twelfth of $41,700 will be added to the monthly CHCF-A support determined in the GRC resolution.
Happy Valley, Page 8 of Appendix A
Happy Valley has a 2007 CHCF-A revenue requirement of $2,701,671.27 (at Line 6, Page 8 of Appendix A). Happy Valley, in Advice Letter #292 stated that it is not seeking CHCF-A funding in 2007. Thus, Happy Valley will not receive any CHCF-A support at this time.
Hornitos, Page 9 of Appendix A
Hornitos has a 2007 CHCF-A revenue requirement of $444,116.00 (at Line 6, Page 9 of Appendix A). Hornitos, in Advice letter #260, stated that it is not requesting a draw from the CHCF-A at this time. Therefore, Hornitos will not receive any CHCF-A support for 2007.
Kerman, Page 10 of Appendix A
Kerman has a CHCF-A revenue requirement of $1,637,920.18 (at Line 6, Page 10 of Appendix A). Since Kerman projected a rate of return of less than 10% and its waterfall is set at 100%, Kerman will receive a monthly CHCF-A support of $136,493.35 for January through December 2007, i.e. one-twelfth of $1,637,920.18.
Pinnacles, Page 11 of Appendix A
Pinnacles has a 2007 CHCF-A revenue requirement of $137,914.12 (at Line 6, Page 11 of Appendix A). This amount is reduced to $100,941.72 after the means test. Since Pinnacles waterfall is set at 100%, Pinnacles will receive a monthly support of $8,411.81 for January through December 2007, i.e., one-twelfth of $100,941.72.
Ponderosa, Page 12 of Appendix A
Ponderosa has a 2007 CHCF-A revenue requirement of $2,802,055.25
(at Line 6, Page 12 of Appendix A). Since Ponderosa projected a rate of return of less than 10% and its waterfall is set at 100%, Ponderosa shall receive a monthly CHCF-A support of $233,504.60 for January through December 2007, i.e. one-twelfth of $2,802,055.25.
Sierra, Page 13 of Appendix A
Sierra has a CHCF-A revenue requirement of $13,375,132.95 (at Line 6, Page 13 of Appendix A). This amount is reduced to $13,160,139.41 after the means test. Since Sierra's waterfall is set at 100%, Sierra shall receive a monthly CHCF-A support of $1,096,678.28 for January through December 2007, i.e. one-twelfth of $13,160,139.41.
Siskiyou, Page 14 of Appendix A
Siskiyou has a CHCF-A revenue requirement of $4,825,151.00 (at Line 6, Page 14 of Appendix A). In accordance with D.91-09-042, Siskiyou's 2007 filing is not subject to the means test since its 2007 filing occurs 12 months after the conclusion of its year 2006 GRC. In addition, pursuant to §D of the Implementation Rules, Siskiyou's waterfall is set at 100%. Thus, Siskiyou shall receive a monthly CHCF-A support of $402,095.92, i.e. one-twelfth of $4,825,151.00 for January through December 2007.
Verizon-WC, Page 15 of Appendix A
Verizon-WC has a 2007 CHCF-A revenue requirement of $811,335.00 (at Line 6, Page 15 of Appendix A). In its advice letter, Verizon-WC stated that they are not requesting a draw from the CHCF-A. Thus, Verizon-WC will not receive any CHCF-A support for 2007.
Volcano, Page 16 of Appendix A
Volcano has a CHCF-A revenue requirement of $2,423,859.36 (at Line 6, Page 15 of Appendix A). Since Volcano projected a rate of return of less than 10% and since its waterfall is set at 100%, Volcano shall receive a monthly CHCF-A support of $201,988.28 for January through December 2007, i.e. one-twelfth of $2,423,859.36.
Winterhaven, Page 17 of Appendix A
Winterhaven has a 2007 CHCF-A revenue requirement of $38,172.50 (at Line 6, Page 16 of Appendix A). In its advice letter, Winterhaven stated that they are not requesting a draw from the CHCF-A. Thus, Winterhaven will not receive any CHCF-A support for 2007.
The Commission finds TD's recommended CHCF-A support payments for the 17 small LECs for 2007 reasonable and consistent with our orders and are therefore adopted.
B. CHCF-A Budget for FY 2006-07 and FY 2007-08
In Resolution T- 16956, the Commission adopted a CHCF-A program budget of $58.814 million for FY 2006-07. For FY 2007-08, in Resolution T-17043, the Commission adopted budget for the CHCF-A program is $66.662 million. Of the budgeted amounts, $47.720 million and $ 55.713 million, have been allocated as program payments to the small LECs for FY 2006-07 and FY 2007-08, respectively.
There are enough funds in both the FY 2006-07 and FY 2007-08 budgets to cover the 2007 CHCF-A support to the small LECs.
Comments on Draft Resolution
In compliance with PU Code § 311(g), a notice letter was emailed on November 14,2006 informing the 17 small LECs, the CHCFA-AC, the parties of record in R01-08-002 and the parties on the service list of A99-09-044 of the availability of the draft of this Resolution for public comments at the Commission's web site http://www.cpuc.ca.gov/static/documents/index.htm. This letter also informed parties that the final Resolution adopted by the Commission will be posted and will be available at the same web site.
TD did not receive any comments on the draft resolution.
Findings
1. The California High Cost Fund (HCF) was implemented by Decision (D.) 88-07-022, as modified by D.91-05-016 and D.91-09-042. The Implementation Rules governing the CHCF-A can be found in their entirety in the Appendix of D.91-09-042. The purpose of the HCF was to provide a source of supplemental revenues to three mid-size Local Exchange Carriers (LECs) and seventeen small LECs whose basic exchange access line service rates would otherwise be increased to levels that would threaten universal service.
2. D.96-10-066 changed the name of HCF to California High Cost Fund A (CHCF-A) and created the California High Cost Fund-B (CHCF-B). This decision included the
three mid-size LECs in the CHCF-B for the purpose of determining universal service subsidy support and maintained the CHCF-A for the 17 small LECs. D.98-06-065 renamed the CHCF-A Trust Administrative Committee to CHCF-A Administrative Committee (CHCFA-AC) and revised the governance of CHCF-A to be consistent with State rules and procedures.
3. In October 1999, Public Utilities (PU) Code § 270-281 were codified as a result of the enactment of Senate Bill 669.
4. PU Code § 270(b) requires that the monies in CHCF-A may only be expended pursuant to § 270-281 and upon appropriation in the annual Budget Act.
5. The Telecommunications Division (TD) reviewed the filings made by the 17 small Local Exchange Carriers (LECs) in connection with the 2007 CHCF-A payment requirements.
6. TD revised the 2007 CHCF-A support requests submitted by the 17 small LECs in accordance with the Implementation Rules and Guidelines set forth in D.88-07-022 as modified by D.91-05-016, D.91-09-042, Resolution T-16117, D.00-09-072 and D.01-02-018.
7. Foresthill's 2007 CHCF-A draw should be addressed as a part of Commission action in Foresthill's General Rate Case resolution. However, Foresthill's request for the recovery of lost revenue due to the Federal Communications Commission Declaratory Ruling and Report and Order in its Intercarrier Compensation Docket (CC Docket No. 01-92) (the T-Mobile Decision) should be considered in this resolution.
8. The total approved 2007 CHCF-A draw for Calaveras, Cal-Ore, Citizens-GS, Citizens-Tu, Ducor, Global Valley Networks, Inc., Foresthill, Happy Valley, Hornitos, Kerman, Pinnacles, Ponderosa, Sierra, Siskiyou, Verizon-WC, Volcano, and Winterhaven should be $28,370,801.08.
9. The monthly support payments for January 2007 through December 2007 are to be paid by the TD in concert with the Information and Management Services Division within 30 days after the close of each calendar month subject to the availability of funds and the Commission and State adoption of the budgets covering the payment of the 2007 CHCF-A support. In the event that the monthly support payments due the small LECs are not paid within 30 days after the close of each calendar month, TD shall include in those payments interest equal to the 3-month commercial paper rate.
10. In Resolution T- 16956, the Commission adopted a CHCF-A program budget of $58.814 million for FY 2006-07. For FY 2007-08, in Resolution T-17043, the Commission adopted budget for the CHCF-A program is $66.662 million. There are enough funds in both the FY 2006-07 and FY 2007-08 budgets to cover the 2007 CHCF-A support to the small ILECs.
11. A notice letter was emailed on November 14, 2006 informing the 17 small LECs, the CHCFA-AC, the parties of record in R01-08-002 and the parties on the service list of A99-09-044 of the availability of the draft resolution for public comments at the Commission's web site http://www.cpuc.ca.gov/static/documents/index.htm. In addition they were informed of the availability of the conformed resolution, when adopted by the Commission, at the same web site.
12. TD did not receive any comments on the draft resolution
13. The Commission finds TD's recommended CHCF-A support for each of the 17 small LECs as summarized in Appendix A of this Resolution reasonable and consistent with Commission orders and should be adopted.
THEREFORE, IT IS ORDERED that:
1. The respective California High Cost Fund A (CHCF-A) support for each of the 17 small Local Exchange Carriers (LECs), as described in the body and summarized in Appendix A of this Resolution, is adopted.
2. The total approved CHCF-A support of $28,370,801.08 for the 17 LECs for 2007 is as listed below:

The monthly support payments for January 2007 through December 2007 are to be paid by the Telecommunications Division in concert with the Information and Management Services Division within 30 days after the close of each calendar month. The prompt payment of monthly support to the LECs is contingent on the availability of funds and the Commission and State adoption of the budgets covering the payment for the 2007 CHCF-A support. In the event that the monthly support payments due the small LECs are not paid within 30 days after the close of each calendar month, TD shall include in those payments interest equal to the 3-month commercial paper rate.
3. The program support payment of $28,370,801.08 for the 17 small LECs shall be paid out of the CHCF-A fund.
This Resolution is effective today.
I hereby certify that this Resolution was adopted by the Public Utilities Commission at its regular meeting on December 14, 2006. The following Commissioners approved it:
STEVE LARSON Executive Director |
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1 The T-Mobile Decision established new rules prohibiting LECS from imposing compensation arrangements on commercial mobile radio service providers through tariffs. Instead, the LECS must negotiate compensation arrangements with CMRS providers.
2 This is consistent with directives set forth in D.01-02-018 and D.01-09-064.
3 Verizon Telephone Company resulted from the merger of GTE of CA and GTE Contel.
4 The January 2007 monthly support will be paid in February 2007; the December 2007 monthly support will be paid in January 2008.
5 D.88-07-022 was modified by D.91-05-016, D.91-09-042, Resolution T-16117, D.00-09-072, D.01-02-018, and D.01-05-031. These guidelines are summarized in the Appendix of D. 91-09-042, which are hereinafter referred to as the Implementation Rules.
6 Data used is the NECA projected 2007 USF Payments provided by NECA on October 12, 2006.