Thomas Attachments A,B,C,D and E

Thomas Comment Dec Regarding Phase 2B Issues

APPENDIX A

Summary of Adopted Adjustments to Net Operating Income and Rate Base

Pacific Bell Intrastate Regulated Operations

Phase 2B

1997

Joint Exhibit

Index

Line

Number

Adopted Adjustments to Net Operating Income

Pacific Bell

Total Co.

Non-Reg (Below the

Line )

Interstate

Separations

Intrastate Reg Before

Tax

Income

Tax

Intrastate Regulated

After Tax

Phase 2B Net Operating Income

39

1.

SBC Ops FAS 106 Merger Conforming Expense

-

-

-

-

40

2.

AMDOC Awards SBC Operations

-

-

-

-

41

3.

Excess Executive Compensation SBC Operations

-

-

-

-

42

4.

SBC Ops Sec. Alloc of Parent Mgt Fees

-

-

-

-

43

5.

SBC Ops Call Ctr Depreciation, Merger Implementation Exp.

-

-

-

-

44

6.

SBC Svcs "Excess" Executive Comp Expense

-

-

-

-

45

7.

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

-

-

-

-

46

8.

Parent "Excess" Executive Compensation Expense

3,146,751

17,745

643,633

2,485,373

(1,012,690)

1,472,683

47

9.

Parent Political and Legislative Influence Expense

18,219,042

-

3,747,639

14,471,403

(5,896,518)

8,574,885

48

10.

Parent Legal Expense

-

-

-

-

49

11.

Parent Public Relations & Corporate Sponsorship Expense

3,667,301

94,355

702,983

2,869,963

(1,169,395)

1,700,568

50

12.

Parent Corporate Development Expense

-

-

-

-

51

13.

Parent Strategic Planning Expense

3,630,668

70,541

732,315

2,827,812

(1,152,220)

1,675,592

52

14.

Parent Contributions, Memberships, Foundation Expense

342,104

-

70,370

271,734

(110,721)

161,013

53

15.

Parent Out of Period Expense

(7,415,911)

(100,845)

(1,504,702)

(5,810,364)

2,367,491

(3,442,873)

54

16.

Parent Merger Conforming Expense

-

-

-

-

55

17.

Parent Impact of Adjustments on Billings to PBD

1,301,134

-

-

1,301,134

(530,160)

770,974

56

18.

MSI USA "Excess" Executive Compensation Billed Directly

-

-

-

-

57

19.

Parent PB Employee Transfer Fees Billed Back to Pac Bell

1,350,777

19,407

273,862

1,057,508

(430,892)

626,616

59

20.

Nevada Bell Net Directory Revenue

-

-

-

-

21.

TRI Expenses

-

-

-

-

60b

22.

Depreciation Expense Timing Adjustment

-

-

-

-

61

23.

Advertising Direct Assignment and Common Allocations

-

-

-

-

62

24.

Customer Service Non-Productive Salary Allocations

(2,285,929)

(532,304)

(1,753,625)

714,532

(1,039,093)

63

25.

Affiliate Marketing Services Revenue

-

-

-

-

64

26.

Non-regulated Tracking Code Direct Assignment Errors

15,926

3,441

12,485

(5,087)

7,398

65

27.

National-Local Strategy Implementation

-

-

-

-

66

28.

1997 Corporate Sponsorship Costs

2,083,333

371,135

1,712,198

(697,652)

1,014,546

67

29.

Customer Premise Equipment Costs

-

-

-

-

1

30.

Unsupported Contingent Liabilities - Revenues

40,463,493

-

-

40,463,493

(16,487,255)

23,976,238

Summary of Adopted Adjustments to Net Operating Income and Rate Base

Pacific Bell Intrastate Regulated Operations

Phase 2B

1997

Joint Exhibit

Index

Line

Number

Adopted Adjustments to Net Operating Income

Pacific Bell

Total Co.

Non-Reg (Below the

Line )

Interstate

Separations

Intrastate Reg Before

Tax

Income

Tax

Intrastate Regulated

After Tax

2

31.

Bellcore Dividends

6,554,000

-

-

6,554,000

(2,670,493)

3,883,507

3

32.

Uncollectible Revenues - RCRMS (PacBell reports flows thru)

53,533,000

53,533,000

-

53,533,000

4

33.

Gain on Sale of Bellcore

19,642,499

4,246,767

15,395,732

(6,273,145)

9,122,587

5

34.

Local Number Portability Costs

109,203,787

869,074

21,734,713

86,600,000

(35,286,036)

51,313,964

6

35.

Local Competition Costs

41,767,998

793,949

40,974,049

(16,695,286)

24,278,763

7

36.

Merger Savings

-

-

-

-

-

-

8

37.

Advanced Communications Network

38,880,766

739,068

8,023,530

30,118,168

(12,271,949)

17,846,219

9

38.

Software Buy-Out Agreement

-

-

-

-

10

39.

Unsupported Contingent Liabilities - Operating Expense

91,639,150

2,472,834

89,166,316

(36,331,707)

52,834,609

11

40.

Incentive Pay Accrual

44,690,203

734,316

9,602,222

34,353,665

(13,997,744)

20,355,921

12

41.

ISP-Bound Traffic Separations

(19,299,000)

(179,010)

-

(19,119,990)

7,790,631

(11,329,359)

13

42.

Uncollectible Settlements - RCRMS

35,300,000

-

7,261,210

28,038,790

(11,424,685)

16,614,105

16

43.

SFAS 112

12,600,000

521,250

2,484,599

9,594,151

(3,909,233)

5,684,918

17

44.

Intrabuilding Cable Amortization

33,053,412

188,404

-

32,865,008

(13,391,176)

19,473,832

18

45.

SAVR Delayed Retirements

10,031,046

62,192

-

9,968,854

(4,061,909)

5,906,945

19

46.

SAVR Reverse Retirements

461,169

2,859

-

458,310

(186,743)

271,567

20

47.

Equal Access IEMR Ratemaking Adjustment

-

-

-

-

22

48.

Ameritech Income Tax Misclass

-

-

-

-

23

49.

Income Tax Normalization - Phase 2B Issues

9,325,000

-

-

9,325,000

-

9,325,000

24

50.

Excess Deferred Income Tax

-

-

-

-

25

51.

Sales and Use Tax Accrual

1,000,000

222,590

777,410

(316,763)

460,647

26

52.

Employment Tax Error

-

-

-

-

68

53.

PIU Accrual

(14,673,001)

(14,673,001)

5,978,661

(8,694,340)

69

54.

USOAR Turnaround Accrual

(23,123,001)

(23,123,001)

9,421,698

(13,701,303)

70b

55.

LNP Depreciation

1,159,999

1,159,999

(472,653)

687,346

71b

56.

AFUDC

178,000

178,000

(72,528)

105,472

57.

Total Phase 2B Net Operating Income

516,443,717

6,306,139

58,084,003

452,053,575

(158,581,629)

293,471,946

Phase 2B Rate Base

29

58.

SFAS 112 Liability

(213,204,405)

30

59.

Vacation Liability

(51,867,976)

31

60.

SFAS 106 Accrued Liability

124,000

32

61.

Accrued Contingent Liability

(28,039,000)

60a

62.

Depreciation Expense Timing Adjustment

-

27

63.

Cash Working Capital

(511,550,000)

28

64.

Prepaid Directory Expense

93,805,000

35

65.

Restructure Reserve

(29,070,727)

36

66.

Accumulated Reserve for Depreciation

14,069,957

37

67.

Accumulated Deferred Income Tax

(57,788,323)

38

68.

Excess Deferred Income Tax

-

70a

69.

LNP Plant

(14,482,000)

71a

70.

AFUDC

(2,327,000)

72

71.

PBOP Pre-Funding Plant Adj.

13,312,000

72.

Total Phase 2B Rate Base

(787,018,474)

Summary of Adopted Audit Adjustments to Net Operating Income and Rate Base

Pacific Bell Intrastate Regulated Operations

Phase 2B

1998

Joint Exhibit

Index No.

Line

Number

Adopted Adjustments to Net Operating Income

Pacific Bell

Total Co.

Non-Reg (Below the

Line )

Interstate

Separations

Intrastate Reg Before

Tax

Income

Tax

Intrastate Regulated

After Tax

Phase 2B Net Operating Income

39

1.

SBC Ops FAS 106 Merger Conforming Expense

-

-

-

-

40

2.

AMDOC Awards SBC Operations

-

-

-

-

41

3.

Excess Executive Compensation SBC Operations

1,088,244

53,543

222,924

811,777

(330,767)

481,010

42

4.

SBC Ops Sec. Alloc of Parent Mgt Fees

660,252

32,486

135,251

492,515

(200,680)

291,835

43

5.

SBC Ops Call Ctr Depreciation, Merger Implementation Exp.

784,511

269,817

114,679

400,015

(162,990)

237,025

44

6.

SBC Svcs "Excess" Executive Comp Expense

364,804

12,115

77,783

274,906

(112,013)

162,893

45

7.

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

596,298

25,231

122,508

448,559

(182,770)

265,789

46

8.

Parent "Excess" Executive Compensation Expense

15,059,186

362,378

3,162,128

11,534,680

(4,699,921)

6,834,759

47

9.

Parent Political and Legislative Influence Expense

21,532,160

-

4,639,061

16,893,099

(6,883,262)

10,009,837

48

10.

Parent Legal Expense

981,611

37,545

203,397

740,669

(301,793)

438,876

49

11.

Parent Public Relations & Corporate Sponsorship Expense

19,455,535

833,439

4,136,395

14,485,701

(5,902,344)

8,583,357

50

12.

Parent Corporate Development Expense

6,859,066

257,693

1,422,273

5,179,100

(2,110,276)

3,068,824

51

13.

Parent Strategic Planning Expense

1,178,332

35,205

245,228

897,899

(365,858)

532,041

52

14.

Parent Contributions, Memberships, Foundation Expense

1,439,107

24,501

304,774

1,109,832

(452,212)

657,620

53

15.

Parent Out of Period Expense

7,415,911

187,881

1,556,204

5,671,826

(2,311,042)

3,360,784

54

16.

Parent Merger Conforming Expense

-

-

-

-

55

17.

Parent Impact of Adjustments on Billings to PBD

6,607,026

-

-

6,607,026

(2,692,099)

3,914,927

56

18.

MSI USA "Excess" Executive Compensation Billed Directly

-

-

-

-

57

19.

Parent PB Employee Transfer Fees Billed Back to Pac Bell

-

-

-

-

59

20.

Nevada Bell Net Directory Revenue

-

-

-

-

-

21.

TRI Expenses

24,627,790

5,849,100

18,778,690

(7,651,565)

11,127,125

60b

22.

Depreciation Expense Timing Adjustment

-

-

-

-

61

23.

Advertising Direct Assignment and Common Allocations

6,519,231

2,301,560

959,014

3,258,657

(1,327,772)

1,930,885

62

24.

Customer Service Non-Productive Salary Allocations

(7,450,229)

(1,769,429)

(5,680,800)

2,314,699

(3,366,101)

63

25.

Affiliate Marketing Services Revenue

6,825,006

1,365,001

5,460,005

(2,224,734)

3,235,271

64

26.

Non-regulated Tracking Code Direct Assignment Errors

9,534,336

2,361,549

7,172,787

(2,922,624)

4,250,163

65

27.

National-Local Strategy Implementation

-

-

-

-

66

28.

1997 Corporate Sponsorship Costs

-

-

-

-

67

29.

Customer Premise Equipment Costs

22,721,475

5,680,369

17,041,106

(6,943,569)

10,097,537

1

30.

Unsupported Contingent Liabilities - Revenues

-

-

-

-

2

31.

Bellcore Dividends

-

-

-

-

3

32.

Uncollectible Revenues - RCRMS (PacBell reports flows thru)

-

-

-

-

Summary of Adopted Audit Adjustments to Net Operating Income and Rate Base

Pacific Bell Intrastate Regulated Operations

Phase 2B

1998

Joint Exhibit

Index No.

Line

Number

Adopted Adjustments to Net Operating Income

Pacific Bell

Total Co.

Non-Reg (Below the

Line )

Interstate

Separations

Intrastate Reg Before

Tax

Income

Tax

Intrastate Regulated

After Tax

4

33.

Gain on Sale of Bellcore

-

-

-

-

5

34.

Local Number Portability Costs

61,870,980

1,737,102

13,040,878

47,093,000

(19,188,514)

27,904,486

6

35.

Local Competition Costs

8,447,002

483,056

7,963,946

(3,244,989)

4,718,957

7

36.

Merger Savings

4,200,000

-

-

4,200,000

(1,711,332)

2,488,668

8

37.

Advanced Communications Network

10,034,385

573,833

2,230,593

7,229,959

(2,945,919)

4,284,040

9

38.

Software Buy-Out Agreement

-

-

-

-

10

39.

Unsupported Contingent Liabilities - Operating Expense

1,920,000

6,034

1,913,966

(779,865)

1,134,101

11

40.

Incentive Pay Accrual

(57,515,730)

(4,780,351)

(11,995,480)

(40,739,899)

16,599,879

(24,140,020)

12

41.

ISP-Bound Traffic Separations

-

-

-

-

13

42.

Uncollectible Settlements - RCRMS

16,800,000

3,619,560

13,180,440

(5,370,502)

7,809,938

16

43.

SFAS 112

-

-

-

-

-

-

17

44.

Intrabuilding Cable Amortization

28,333,938

300,340

-

28,033,598

(11,422,570)

16,611,028

18

45.

SAVR Delayed Retirements

7,232,407

83,173

-

7,149,234

(2,913,027)

4,236,207

19

46.

SAVR Reverse Retirements

1,050,412

12,080

-

1,038,332

(423,079)

615,253

20

47.

Equal Access IEMR Ratemaking Adjustment

(10,931,000)

(10,931,000)

4,453,945

(6,477,055)

22

48.

Ameritech Income Tax Misclass

-

-

-

23

49.

Income Tax Normalization - Phase 2B Issues

85,117,000

-

-

85,117,000

85,117,000

24

50.

Excess Deferred Income Tax

38,408,000

8,783,910

29,624,090

29,624,090

25

51.

Sales and Use Tax Accrual

999,996

228,699

771,297

(314,273)

457,024

26

52.

Employment Tax Error

-

-

-

-

68

53.

PIU Accrual

-

-

-

-

69

54.

USOAR Turnaround Accrual

-

-

-

-

70b

55.

LNP Depreciation

2,678,000

2,678,000

(1,091,178)

1,586,822

71b

56.

AFUDC

656,000

656,000

(267,294)

388,706

57.

Total Phase 2B Net Operating Income

346,101,041

2,848,661

46,696,369

296,556,011

(74,082,308)

222,473,703

Phase 2B Rate Base

29

58.

SFAS 112 Liability

(236,462,847)

30

59.

Vacation Liability

(51,359,429)

31

60.

SFAS 106 Accrued Liability

(5,998,000)

32

61.

Accrued Contingent Liability

(20,106,000)

60a

62.

Depreciation Expense Timing Adjustment

-

27

63.

Cash Working Capital

(530,735,000)

28

64.

Prepaid Directory Expense

83,904,000

35

65.

Restructure Reserve

(29,024,711)

36

66.

Accumulated Reserve for Depreciation

36,308,845

37

67.

Accumulated Deferred Income Tax

(55,160,036)

38

68.

Excess Deferred Income Tax

12,800,000

70a

69.

LNP Plant

(32,794,000)

71a

70.

AFUDC

(8,370,000)

72

71.

PBOP Pre-Funding Plant Adj.

13,312,000

72.

Total Phase 2B Rate Base

(823,685,178)

Summary of Adopted Adjustments to Net Operating Income and Rate Base

Pacific Bell Intrastate Regulated Operations

Phase 2B

1999

Joint Exhibit

Index No.

Line

Number

Adopted Adjustments to Net Operating Income

Pacific Bell

Total Co.

Non-Reg (Below the

Line )

Interstate

Separations

Intrastate Reg Before

Tax

Income

Tax

Intrastate Regulated

After Tax

Phase 2B Net Operating Income

39

1.

SBC Ops FAS 106 Merger Conforming Expense

4,062,029

502,081

764,182

2,795,766

(1,139,163)

1,656,603

40

2.

AMDOC Awards SBC Operations

615,307

68,515

120,399

426,393

(173,738)

252,655

41

3.

Excess Executive Compensation SBC Operations

1,532,717

189,449

288,347

1,054,921

(429,838)

625,083

42

4.

SBC Ops Sec. Alloc of Parent Mgt Fees

663,868

82,057

124,892

456,919

(186,176)

270,743

43

5.

SBC Ops Call Ctr Depreciation, Merger Implementation Exp.

-

-

-

-

-

-

44

6.

SBC Svcs "Excess" Executive Comp Expense

310,190

20,703

62,363

227,124

(92,544)

134,580

45

7.

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

497,121

31,518

100,409

365,194

(148,802)

216,392

46

8.

Parent "Excess" Executive Compensation Expense

15,652,558

411,181

3,276,084

11,965,293

(4,875,378)

7,089,915

47

9.

Parent Political and Legislative Influence Expense

8,996,671

-

1,931,234

7,065,437

(2,878,883)

4,186,554

48

10.

Parent Legal Expense

483,922

28,214

97,823

357,885

(145,824)

212,061

49

11.

Parent Public Relations & Corporate Sponsorship Expense

20,210,683

714,200

4,614,691

14,881,792

(6,063,735)

8,818,057

50

12.

Parent Corporate Development Expense

8,007,868

473,146

1,617,643

5,917,079

(2,410,973)

3,506,106

51

13.

Parent Strategic Planning Expense

902,785

20,982

190,182

691,621

(281,808)

409,813

52

14.

Parent Contributions, Memberships, Foundation Expense

(6,557,997)

34,601

(1,415,174)

(5,177,424)

2,109,593

(3,067,831)

53

15.

Parent Out of Period Expense

-

-

-

-

-

-

54

16.

Parent Merger Conforming Expense

1,029,118

52,190

209,802

767,126

(312,573)

454,553

55

17.

Parent Impact of Adjustments on Billings to PBD

7,516,450

-

-

7,516,450

(3,062,653)

4,453,797

56

18.

MSI USA "Excess" Executive Compensation Billed Directly

4,558,803

251,564

928,959

3,378,280

(1,376,514)

2,001,766

57

19.

Parent PB Employee Transfer Fees Billed Back to Pac Bell

-

-

-

-

-

-

59

20.

Nevada Bell Net Directory Revenue

(16,179,000)

-

-

(16,179,000)

4,926,000

(11,253,000)

21.

TRI Expenses

19,793,114

-

4,223,534

15,569,580

(6,343,981)

9,225,599

60b

22.

Depreciation Expense Timing Adjustment

3,713,626

-

796,543

2,917,083

(1,188,595)

1,728,488

61

23.

Advertising Direct Assignment and Common Allocations

5,131,057

1,175,687

997,616

2,957,754

(1,205,166)

1,752,588

62

24.

Customer Service Non-Productive Salary Allocations

(10,327,231)

-

(2,203,666)

(8,123,565)

3,310,028

(4,813,537)

63

25.

Affiliate Marketing Services Revenue

28,879,501

-

5,775,900

23,103,601

(9,413,793)

13,689,808

64

26.

Non-regulated Tracking Code Direct Assignment Errors

7,284,797

-

1,820,400

5,464,397

(2,226,523)

3,237,874

65

27.

National-Local Strategy Implementation

8,575,331

634,181

1,704,655

6,236,495

(2,541,122)

3,695,373

66

28.

1997 Corporate Sponsorship Costs

-

-

-

-

-

-

67

29.

Customer Premise Equipment Costs

7,803,311

-

1,950,828

5,852,483

(2,384,653)

3,467,830

1

30.

Unsupported Contingent Liabilities - Revenues

-

-

-

-

-

-

2

31.

Bellcore Dividends

-

-

-

-

-

-

3

32.

Uncollectible Revenues - RCRMS (PacBell reports flows thru)

-

-

-

-

-

-

4

33.

Gain on Sale of Bellcore

-

-

-

-

-

-

5

34.

Local Number Portability Costs

38,861,608

1,215,608

-

37,646,000

(15,339,239)

22,306,761

6

35.

Local Competition Costs

-

-

-

-

-

-

7

36.

Merger Savings

4,200,000

-

-

4,200,000

(1,711,332)

2,488,668

8

37.

Advanced Communications Network

5,363,702

465,820

1,140,353

3,757,529

(1,531,043)

2,226,486

Summary of Adopted Adjustments to Net Operating Income and Rate Base

Pacific Bell Intrastate Regulated Operations

Phase 2B

1999

Joint Exhibit

Index No.

Line

Number

Adopted Adjustments to Net Operating Income

Pacific Bell

Total Co.

Non-Reg (Below the

Line )

Interstate

Separations

Intrastate Reg Before

Tax

Income

Tax

Intrastate Regulated

After Tax

9

38.

Software Buy-Out Agreement

55,651,506

348,922

10,837,094

44,465,490

(18,117,909)

26,347,581

10

39.

Unsupported Contingent Liabilities - Operating Expense

13,968,240

2,203,104

11,765,136

(4,793,822)

6,971,314

11

40.

Incentive Pay Accrual

49,203,329

4,026,500

10,115,741

35,061,088

(14,285,991)

20,775,097

12

41.

ISP-Bound Traffic Separations

-

-

-

-

-

-

13

42.

Uncollectible Settlements - RCRMS

1,100,000

-

236,126

863,874

(351,994)

511,880

16

43.

SFAS 112

-

-

-

-

-

-

17

44.

Intrabuilding Cable Amortization

-

-

-

-

-

-

18

45.

SAVR Delayed Retirements

-

-

-

-

-

-

19

46.

SAVR Reverse Retirements

3,996,587

39,966

-

3,956,621

(1,612,165)

2,344,456

20

47.

Equal Access IEMR Ratemaking Adjustment

-

-

-

-

-

-

22

48.

Ameritech Income Tax Misclass

8,001,866

-

-

8,001,866

-

8,001,866

23

49.

Income Tax Normalization - Phase 2B Issues

(64,903,000)

-

-

(64,903,000)

-

(64,903,000)

24

50.

Excess Deferred Income Tax

38,408,000

-

8,736,668

29,671,332

-

29,671,332

25

51.

Sales and Use Tax Accrual

(5,520,320)

-

(3,114,901)

(2,405,419)

980,112

(1,425,307)

26

52.

Employment Tax Error

9,655,828

163,183

2,159,292

7,333,353

(2,988,048)

4,345,305

68

53.

PIU Accrual

-

-

-

-

-

-

69

54.

USOAR Turnaround Accrual

-

-

-

-

-

-

70b

55.

LNP Depreciation

4,246,999

-

-

4,246,999

(1,730,482)

2,516,517

71b

56.

AFUDC

856,000

-

-

856,000

(348,786)

507,214

57.

Total Phase 2B Net Operating Income

286,246,943

13,153,372

58,088,019

215,005,552

(100,367,513)

114,638,040

Phase 2B Rate Base

29

58.

SFAS 112 Liability

(255,430,427)

30

59.

Vacation Liability

(45,735,145)

31

60.

SFAS 106 Accrued Liability

5,352,000

32

61.

Accrued Contingent Liability

(7,800,000)

60a

62.

Depreciation Expense Timing Adjustment

(2,917,083)

27

63.

Cash Working Capital

(378,865,000)

28

64.

Prepaid Directory Expense

71,382,000

35

65.

Restructure Reserve

(28,975,159)

36

66.

Accumulated Reserve for Depreciation

46,060,404

37

67.

Accumulated Deferred Income Tax

(43,318,848)

38

68.

Excess Deferred Income Tax

38,400,000

70a

69.

LNP Plant

(43,507,000)

71a

70.

AFUDC

(12,964,000)

72

71.

PBOP Pre-Funding Plant Adj.

13,312,000

72.

Total Phase 2B Rate Base

(639,172,092)

APPENDIX B

R.01-09-001 / I.01-09-002

Joint Exhibit of Overland Consulting, Inc., ORA, TURN and Pacific Bell

Showing Impact of Audit Corrections on Pacific Bell's Reported IEMR Results for 1997 - 1999

Index #

Report Chapter

Adjustment Description (A) (B)

Status of Dispute

Party

NOTES

1997 Final Adjustments

1997 Individual Adjustment Impact on Rate of Return

1998 Final Adjustments

1998 Individual Adjustment Impact on Rate of Return

1999 Final Adjustments

1999 Individual Adjustment Impact on Rate of Return

Total Audit Period Final Adjustment Amounts

Income Statement Adjustments

1

5-13

Unsupported Contingent Liabilities - Revenues (IS)

SUBS

Overland

40,463,493

0.40%

0

0.00%

0

0.00%

40,463,493

ORA

(4)

40,463,493

0.40%

0

0.00%

0

0.00%

40,463,493

TURN

(5)

40,463,493

0.40%

0

0.00%

0

0.00%

40,463,493

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

2

5-14

Bellcore Dividends (IS)

NONE

Overland

3,883,507

0.04%

0

0.00%

0

0.00%

3,883,507

ORA

(2)

3,883,507

0.04%

0

0.00%

0

0.00%

3,883,507

TURN

(6)

Pacific

3,883,507

0.04%

0

0.00%

0

0.00%

3,883,507

3

5-15

Uncollectible Revenues - RCRMS (PacBell flows through) (IS)

SUBS

Overland

53,533,000

0.53%

0

0.00%

0

0.00%

53,533,000

ORA

(4)

53,533,000

0.53%

0

0.00%

0

0.00%

53,533,000

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

4

5-19

Gain on Sale of Bellcore (IS)

NONE

Overland

9,122,587

0.09%

0

0.00%

0

0.00%

9,122,587

ORA

(2)

9,122,587

0.09%

0

0.00%

0

0.00%

9,122,587

TURN

(6)

Pacific

(8)

9,122,587

0

0.00%

0

0.00%

9,122,587

5

6-15

Local Number Portability Costs (IS)

BOTH

Overland

51,313,964

0.51%

27,904,486

0.27%

22,306,761

0.22%

101,525,211

S6-1

ORA

(4)

51,313,964

0.51%

27,904,486

0.27%

22,306,761

0.22%

101,525,211

TURN

(5)

51,313,964

0.51%

27,904,486

0.27%

22,306,761

0.22%

101,525,211

Pacific

0

0.00%

15,645,112

0.15%

22,306,761

0.22%

37,951,873

6

6-19

Local Competition Costs (IS)

SUBS

Overland

40,974,049

0.41%

7,963,946

0.08%

0

0.00%

48,937,995

ORA

(4)

40,974,049

0.41%

7,963,946

0.08%

0

0.00%

48,937,995

TURN

(5)

40,974,049

0.41%

7,963,946

0.08%

0

0.00%

48,937,995

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

7

6-22

Merger Savings Allocation (IS)

AMT

Overland

5,327,527

0.05%

23,321,782

0.23%

(7,704,205)

-0.08%

20,945,104

ORA

(3)

0

0.00%

2,500,000

0.02%

2,470,000

0.02%

4,970,000

TURN

(6)

Pacific

0

0.00%

2,495,834

0.02%

2,470,279

0.02%

4,966,113

8

6-27

Advanced Communications Network (IS)

NONE

Overland

17,846,219

0.18%

4,284,040

0.04%

2,226,486

0.02%

24,356,745

ORA

(4)

17,846,219

0.18%

4,284,040

0.04%

2,226,486

0.02%

24,356,745

TURN

(6)

Pacific

(8)

17,846,219

4,284,040

2,226,486

24,356,745

9

6-31

Software Buy-Out Agreement (IS)

SUBS

Overland

0

0.00%

0

0.00%

44,465,490

0.45%

44,465,490

ORA

(2)

0

0.00%

0

0.00%

44,465,490

0.45%

44,465,490

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

10

6-32

Unsupported Contingent Liabilities - Operating Expense (IS)

SUBS

Overland

89,166,316

0.89%

1,913,966

0.02%

11,765,136

0.12%

102,845,418

ORA

(4)

89,166,316

0.89%

1,913,966

0.02%

11,765,136

0.12%

102,845,418

TURN

(5)

89,166,316

0.89%

1,913,966

0.02%

11,765,136

0.12%

102,845,418

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

11

6-34

Incentive Pay Accrual (IS)

SUBS

Overland

34,353,665

0.34%

(40,739,899)

-0.40%

35,061,088

0.35%

28,674,854

ORA

(2)

34,353,665

0.34%

(40,739,899)

-0.40%

35,061,088

0.35%

28,674,854

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

12

6-37

ISP-Bound Traffic Separations (IS)

NONE

Overland

(11,329,359)

-0.11%

0

0.00%

0

0.00%

(11,329,359)

ORA

(2)

(11,329,359)

-0.11%

0

0.00%

0

0.00%

(11,329,359)

TURN

(6)

Pacific

(11,329,359)

-0.11%

0

0.00%

0

0.00%

(11,329,359)

13

6-36

Uncollectible Settlements - RCRMS (IS)

SUBS

Overland

28,038,790

0.28%

13,180,440

0.13%

863,874

0.01%

42,083,104

ORA

(4)

28,038,790

0.28%

13,180,440

0.13%

863,874

0.01%

42,083,104

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

14

7-9

Pension Expense (IS)

SUBS

Overland

105,280,092

1.05%

108,774,347

1.07%

110,496,463

1.11%

324,550,902

S7-13

ORA

(4)

105,280,092

1.05%

108,774,347

1.07%

110,496,463

1.11%

324,550,902

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

15a

7-13

SFAS 106 (IS)

SUBS

Overland

29,706,000

0.30%

395,443,000

3.89%

103,470,000

1.04%

528,619,000

ORA

(4)

29,706,000

0.30%

395,443,000

3.89%

103,470,000

1.04%

528,619,000

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

15b

7-13

SFAS 106 - Pension Trust Withdrawal (IS)

SUBS

Overland

0

0.00%

0

0.00%

68,749,000

0.69%

68,749,000

S7-6

ORA

(4)

0

0.00%

0

0.00%

68,749,000

0.69%

68,749,000

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

16

7-33

SFAS 112 (IS)

SUBS

Overland

9,594,151

0.10%

0

0.00%

0

0.00%

9,594,151

ORA

(2)

9,594,151

0.10%

0

0.00%

0

0.00%

9,594,151

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

17

8-6

Intrabuilding Cable Amortization (IS)

SUBS

Overland

19,473,832

0.19%

16,611,028

0.16%

0

0.00%

36,084,860

ORA

(4)

19,473,832

0.19%

16,611,028

0.16%

0

0.00%

36,084,860

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

18

8-7

SAVR Delayed Retirements (IS)

SUBS

Overland

5,906,945

0.06%

4,236,207

0.04%

0

0.00%

10,143,152

ORA

(2)

5,906,945

0.06%

4,236,207

0.04%

0

0.00%

10,143,152

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

19

8-7

SAVR Reverse Retirements (IS)

SUBS

Overland

271,567

0.00%

615,253

0.01%

2,344,456

0.02%

3,231,276

ORA

(2)

271,567

0.00%

615,253

0.01%

2,344,456

0.02%

3,231,276

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

20

8-8

Equal Access IEMR Ratemaking Adjustment (IS)

NONE

Overland

0

0.00%

(6,477,055)

-0.06%

0

0.00%

(6,477,055)

S8-1

ORA

(2)

0

0.00%

(6,477,055)

-0.06%

0

0.00%

(6,477,055)

TURN

(6)

Pacific

0

0.00%

(6,477,055)

-0.06%

0

0.00%

(6,477,055)

21

8-12

Reserve Deficiency Amortization (IS)

SUBS

Overland

(1)

0

0.00%

0

0.00%

362,466,228

3.64%

362,466,228

ORA

(4)

0

0.00%

0

0.00%

362,466,228

3.64%

362,466,228

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

22

9-22

Ameritech Income Tax Misclass (IS)

SUBS

Overland

0

0.00%

0

0.00%

8,001,866

0.08%

8,001,866

ORA

(2)

0

0.00%

0

0.00%

8,001,866

0.08%

8,001,866

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

23

9-11

Income Tax Normalization (IS)

SUBS

Overland

(92,198,238)

-0.92%

(5,569,856)

-0.05%

61,264,694

0.61%

(36,503,400)

S9-3

ORA

(4)

(92,198,238)

-0.92%

(5,569,856)

-0.05%

61,264,694

0.61%

(36,503,400)

S9-5

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

24

9-21

Excess Deferred Income Tax (IS)

SUBS

Overland

(1)

0

0.00%

29,624,000

0.29%

29,671,000

0.30%

59,295,000

S9-6

ORA

(4)

0

0.00%

29,624,000

0.29%

29,671,000

0.30%

59,295,000

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

25

9-24

Sales and Use Tax Accrual (IS)

SUBS

Overland

777,410

0.01%

771,297

0.01%

(2,405,419)

-0.02%

(856,712)

ORA

(2)

777,410

0.01%

771,297

0.01%

(2,405,419)

-0.02%

(856,712)

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

26

9-24

Employment Tax Error (IS)

SUBS

Overland

0

0.00%

0

0.00%

7,333,353

0.07%

7,333,353

ORA

(2)

0

0.00%

0

0.00%

7,333,353

0.07%

7,333,353

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

39

15-18

SBC Ops FAS 106 Merger Conforming Expense (IS)

NONE

Overland

0

0.00%

0

0.00%

1,656,603

0.02%

1,656,603

ORA

(2)

0

0.00%

0

0.00%

1,656,603

0.02%

1,656,603

TURN

(6)

Pacific

(8)

0

0.00%

0

0.00%

1,656,603

1,656,603

40

15-19

AMDOCS Awards SBC Operations (IS)

SUBS

Overland

0

0.00%

0

0.00%

252,655

0.00%

252,655

ORA

(4)

0

0.00%

0

0.00%

252,655

0.00%

252,655

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

41

15-20

Excess Executive Compensation SBC Operations (IS)

SUBS

Overland

0

0.00%

465,193

0.00%

610,568

0.01%

1,075,761

ORA

(4)

0

0.00%

465,193

0.00%

610,568

0.01%

1,075,761

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

42

15-21

SBC Ops Sec. Alloc of Parent Mgt Fees (IS)

NONE

Overland

0

0.00%

291,835

0.00%

270,743

0.00%

562,578

ORA

(2)

0

0.00%

291,835

0.00%

270,743

0.00%

562,578

TURN

(6)

Pacific

(8)

0

0.00%

291,835

270,743

562,578

43

15-22

SBC Ops Call Ctr Depreciation, Merger Implmntatn Exp (IS)

NONE

Overland

0

0.00%

237,025

0.00%

0

0.00%

237,025

ORA

(2)

0

0.00%

237,025

0.00%

0

0.00%

237,025

TURN

(6)

Pacific

(8)

0

0.00%

237,025

0

0.00%

237,025

44

16-18

SBC Svcs "Excess" Executive Comp Exp (IS)

SUBS

Overland

0

0.00%

109,093

0.00%

107,020

0.00%

216,113

ORA

(4)

0

0.00%

109,093

0.00%

107,020

0.00%

216,113

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

45

16-19

SBC Svcs, CFL, TRI Sec.Alloc. of Parent Mgt Fees (IS)

NONE

Overland

0

0.00%

265,789

0.00%

216,392

0.00%

482,181

ORA

(2)

0

0.00%

265,789

0.00%

216,392

0.00%

482,181

TURN

(6)

Pacific

(8)

0

0.00%

265,789

216,392

482,181

46

14-9

Parent "Excess" Executive Compensation Expense (IS)

SUBS

Overland

1,451,564

0.01%

6,534,667

0.06%

6,845,540

0.07%

14,831,771

ORA

(4)

1,451,564

0.01%

6,534,667

0.06%

6,845,540

0.07%

14,831,771

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

47

14-23

Parent Political and Legislative Influence Expense (IS)

NONE

Overland

8,574,885

0.09%

10,009,837

0.10%

4,186,554

0.04%

22,771,276

ORA

(2)

8,574,885

0.09%

10,009,837

0.10%

4,186,554

0.04%

22,771,276

TURN

(6)

Pacific

(8)

8,574,885

10,009,837

4,186,554

22,771,276

48

14-26

Parent Legal Expense (IS)

SUBS

Overland

0

0.00%

438,876

0.00%

212,061

0.00%

650,937

ORA

(4)

0

0.00%

438,876

0.00%

212,061

0.00%

650,937

TURN

(5)

0

0.00%

438,876

0.00%

212,061

0.00%

650,937

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

49

14-34

Parent Public Relations & Corporate Sponsorship Exp (IS)

SUBS

Overland

1,700,568

0.02%

8,583,357

0.08%

8,818,057

0.09%

19,101,982

ORA

(4)

1,700,568

0.02%

8,583,357

0.08%

8,818,057

0.09%

19,101,982

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

50

14-33

Parent Corporate Development Expense (IS)

SUBS

Overland

0

0.00%

3,068,824

0.03%

3,506,106

0.04%

6,574,930

ORA

(4)

0

0.00%

3,068,824

0.03%

3,506,106

0.04%

6,574,930

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

51

14-35

Parent Strategic Planning Expense (IS)

SUBS

Overland

1,675,592

0.02%

532,041

0.01%

409,813

0.00%

2,617,446

ORA

(4)

1,675,592

0.02%

532,041

0.01%

409,813

0.00%

2,617,446

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

52

14-38

Parent Contributions, Memberships, Foundation Exp (IS)

NONE

Overland

161,013

0.00%

657,620

0.01%

(3,067,831)

-0.03%

(2,249,198)

ORA

(2)

161,013

0.00%

657,620

0.01%

(3,067,831)

-0.03%

(2,249,198)

TURN

(6)

Pacific

(8)

161,013

657,620

(3,067,831)

(2,249,198)

53

14-39

Parent Out of Period Expense (IS)

SUBS

Overland

(3,442,873)

-0.03%

3,360,784

0.03%

0

0.00%

(82,089)

ORA

(2)

(3,442,873)

-0.03%

3,360,784

0.03%

0

0.00%

(82,089)

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

54

14-40

Parent Merger Conforming Expense (IS)

NONE

Overland

0

0.00%

0

0.00%

454,553

0.00%

454,553

ORA

(2)

0

0.00%

0

0.00%

454,553

0.00%

454,553

TURN

(6)

Pacific

(8)

0

0.00%

0

0.00%

454,553

454,553

55

14-41

Parent Impact of Adjustmts on Billings to PBD (IS)

Overland

(9)

770,974

0.01%

3,914,927

0.04%

4,453,797

0.04%

9,139,698

ORA

(2),(4)

770,974

0.01%

3,914,927

0.04%

4,453,797

0.04%

9,139,698

55i

PBD Parent Impact Legal Expense (IS)

TURN

(5)

0

0.00%

24,752

0.00%

8,965

0.00%

33,717

55a

PBD Parent Impact Contributions Memberships (IS)

NONE

Pacific

(8)

75,500

259,236

195,782

530,518

55b

PBD Parent Impact Corporate Acquisitions (IS)

SUBS

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

55c

PBD Parent Impact Corporate Sponsorships (IS)

SUBS

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

55d

PBD Parent Impact Excess Executive Compensation (IS)

SUBS

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

55e

PBD Parent Impact Lobbying (IS)

NONE

Pacific

(8)

389,744

729,081

881,323

2,000,148

55f

PBD Parent Impact Special Executive Payments (IS)

SUBS

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

55g

PBD Parent Impact Public Relations Expense (IS)

SUBS

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

55h

PBD Parent Impact Strategic Planning Expense (IS)

SUBS

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

55i

PBD Parent Impact Legal Expense (IS)

SUBS

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

55j

PBD Parent Impact Management Fee (IS)

NONE

Pacific

(8)

0

0.00%

1,145,479

1,248,344

2,393,823

55k

PBD Parent Impact Employee Transfer Fees (IS)

NONE

Pacific

(8)

58,754

0

0.00%

0

0.00%

58,754

56

14-41

MSI USA "Excess" Executive Comp Billed Directly (IS)

SUBS

Overland

0

0.00%

0

0.00%

1,833,222

0.02%

1,833,222

ORA

(4)

0

0.00%

0

0.00%

1,833,222

0.02%

1,833,222

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

57

17-18

Parent PB Employee Trsfr Fees Billed Back to PB (IS)

NONE

Overland

626,616

0.01%

0

0.00%

0

0.00%

626,616

ORA

(2)

626,616

0.01%

0

0.00%

0

0.00%

626,616

TURN

(6)

Pacific

(8)

626,616

0

0.00%

0

0.00%

626,616

58

17-18

Fees for Employees Transferred in 1999 (IS)

NONE

Overland

(11)

0

0.00%

0

0.00%

0

0.00%

0

ORA

(4)

0

0.00%

0

0.00%

0

0.00%

0

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

59

18-2

Nevada Bell Net Directory Revenue (IS)

NONE

Overland

0

0.00%

0

0.00%

(11,253,000)

-0.11%

(11,253,000)

18-7

ORA

(2)

0

0.00%

0

0.00%

(11,253,000)

-0.11%

(11,253,000)

TURN

(6)

Pacific

0

0.00%

0

0.00%

(11,253,000)

-0.11%

(11,253,000)

ORA

19

ASI - ADSL Development Cost Treatment (IS)

SUBS

Overland

0

0.00%

0

0.00%

0

0.00%

0

ORA

(3)

2,439,732

0.02%

5,577,046

0.05%

86,291,540

0.87%

94,308,318

TURN

(5)

2,439,732

0.02%

5,577,046

0.05%

86,291,540

0.87%

94,308,318

Pacific

(10)

0

0.00%

0

0.00%

0

0.00%

0

60b

20-20

Depreciation Expense Timing Adjustment (IS)

SUBS

Overland

(1)

0

0.00%

0

0.00%

2,917,083

0.03%

2,917,083

ORA

(2)

0

0.00%

0

0.00%

2,917,083

0.03%

2,917,083

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

61

20-22

Advertising Direct Assignment and Common Allocations (IS)

SUBS

Overland

0

0.00%

1,930,885

0.02%

1,752,588

0.02%

3,683,473

ORA

(2)

0

0.00%

1,930,885

0.02%

1,752,588

0.02%

3,683,473

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

62

20-31

Customer Service Non-Productive Salary Allocations (IS)

SUBS

Overland

(1,039,093)

-0.01%

(3,366,101)

-0.03%

(4,813,537)

-0.05%

(9,218,731)

ORA

(2)

(1,039,093)

-0.01%

(3,366,101)

-0.03%

(4,813,537)

-0.05%

(9,218,731)

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

63

20-37

Affiliate Marketing Services Revenue (IS)

SUBS

Overland

0

0.00%

4,420,889

0.04%

17,936,810

0.18%

22,357,699

ORA

(3)

0

0.00%

3,235,271

0.03%

13,689,808

0.14%

16,925,079

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

64

20-48

Non-regulated Tracking Code Direct Assignment Errors (IS)

NONE

Overland

7,398

0.00%

4,250,163

0.04%

3,237,874

0.03%

7,495,435

ORA

(2)

7,398

0.00%

4,250,163

0.04%

3,237,874

0.03%

7,495,435

TURN

(6)

Pacific

7,398

0.00%

4,250,163

0.04%

3,237,874

0.03%

7,495,435

65

20-48

National-Local Strategy Implementation (IS)

SUBS

Overland

0

0.00%

0

0.00%

3,695,373

0.04%

3,695,373

ORA

(2)

0

0.00%

0

0.00%

3,695,373

0.04%

3,695,373

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

66

20-25

1997 Corporate Sponsorship Costs (IS)

SUBS

Overland

1,014,546

0.01%

0

0.00%

0

0.00%

1,014,546

ORA

(2)

1,014,546

0.01%

0

0.00%

0

0.00%

1,014,546

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

67

20-50

Customer Premise Equipment Costs (IS)

NONE

Overland

0

0.00%

10,097,537

0.10%

3,467,830

0.03%

13,565,367

ORA

(2)

0

0.00%

10,097,537

0.10%

3,467,830

0.03%

13,565,367

TURN

(6)

Pacific

0

0.00%

10,097,537

0.10%

3,467,830

0.03%

13,565,367

68

S5-1

PIU Accrual (IS)

SUBS

Overland

(8,694,340)

-0.09%

0

0.00%

0

0.00%

(8,694,340)

ORA

(2)

(8,694,340)

-0.09%

0

0.00%

0

0.00%

(8,694,340)

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

69

S5-2

USOAR Turnaround Accrual (IS)

SUBS

Overland

(13,701,303)

-0.14%

0

0.00%

0

0.00%

(13,701,303)

ORA

(2)

(13,701,303)

-0.14%

0

0.00%

0

0.00%

(13,701,303)

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

70b

S6-1

LNP Depreciation (IS)

SUBS

Overland

(1)

683,085

0.01%

1,568,573

0.02%

2,491,352

0.03%

4,743,010

ORA

(4)

683,085

0.01%

1,568,573

0.02%

2,491,352

0.03%

4,743,010

TURN

(5)

683,085

0.01%

1,568,573

0.02%

2,491,352

0.03%

4,743,010

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

71b

10-17

AFUDC Depreciation Expense (IS)

SUBS

Overland

(1)

105,472

0.00%

388,706

0.00%

507,214

0.01%

1,001,392

S10-1

ORA

(2)

105,472

0.00%

388,706

0.00%

507,214

0.01%

1,001,392

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

Rate Base Adjustments

27

11-5

Cash Working Capital (RB)

BOTH

Overland

(391,374,000)

0.26%

(513,422,000)

0.48%

(508,363,000)

0.52%

(1,413,159,000)

S11-5

ORA

(3)

(511,550,000)

0.35%

(530,735,000)

0.50%

(378,865,000)

0.38%

(1,421,150,000)

TURN

(5)

(511,550,000)

0.35%

(530,735,000)

0.50%

(378,865,000)

0.38%

(1,421,150,000)

Pacific

(142,169,000)

0.09%

(91,320,000)

0.08%

(91,103,000)

0.09%

(324,592,000)

28

11-28

Prepaid Directory Expense (RB)

SUBS

Overland

93,805,000

-0.06%

83,904,000

-0.07%

71,382,000

-0.07%

249,091,000

ORA

(2)

93,805,000

-0.06%

83,904,000

-0.07%

71,382,000

-0.07%

249,091,000

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

29

11-30

SFAS 112 Liability (RB)

SUBS

Overland

(213,204,405)

0.14%

(236,462,847)

0.22%

(255,430,427)

0.25%

(705,097,679)

ORA

(2)

(213,204,405)

0.14%

(236,462,847)

0.22%

(255,430,427)

0.25%

(705,097,679)

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

30

11-31

Vacation Liability (RB)

SUBS

Overland

(51,867,976)

0.03%

(51,359,429)

0.05%

(45,735,145)

0.04%

(148,962,550)

ORA

(2)

(51,867,976)

0.03%

(51,359,429)

0.05%

(45,735,145)

0.04%

(148,962,550)

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

31

11-31

SFAS 106 Accrued Liability (RB)

SUBS

Overland

124,000

0.00%

(5,998,000)

0.01%

5,352,000

-0.01%

(522,000)

ORA

(2)

124,000

0.00%

(5,998,000)

0.01%

5,352,000

-0.01%

(522,000)

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

32

11-34

Accrued Contingent Liability (RB)

SUBS

Overland

(28,039,000)

0.02%

(20,106,000)

0.02%

(7,800,000)

0.01%

(55,945,000)

ORA

(4)

(28,039,000)

0.02%

(20,106,000)

0.02%

(7,800,000)

0.01%

(55,945,000)

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

33

11-28

Prepaid Pension Costs (RB)

SUBS

Overland

52,640,046

-0.03%

159,667,092

-0.14%

269,302,092

-0.25%

481,609,230

S11-6

ORA

(2)

52,640,046

-0.03%

159,667,092

-0.14%

269,302,092

-0.25%

481,609,230

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

34

10-22

SFAS 106 Plant (RB)

SUBS

Overland

4,892,000

0.00%

(7,621,000)

0.01%

(90,167,000)

0.09%

(92,896,000)

ORA

(2)

4,892,000

0.00%

(7,621,000)

0.01%

(90,167,000)

0.09%

(92,896,000)

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

35

10-22

Restructure Reserve (RB)

AMT

Overland

(29,070,727)

0.02%

(29,024,711)

0.03%

(28,975,159)

0.03%

(87,070,597)

S10-3

ORA

(2)

(29,070,727)

0.02%

(29,024,711)

0.03%

(28,975,159)

0.03%

(87,070,597)

TURN

(6)

Pacific

(4,374,000)

0.00%

(4,350,000)

0.00%

(4,350,000)

0.00%

(13,074,000)

36

10-23

Accumulated Reserve for Depreciation (RB)

SUBS

Overland

(1)

14,069,957

-0.01%

36,308,845

-0.03%

244,868,120

-0.23%

295,246,922

ORA

(2)

14,069,957

-0.01%

36,308,845

-0.03%

244,868,120

-0.23%

295,246,922

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

37

9-23

Accumulated Deferred Income Tax (RB)

SUBS

Overland

(57,788,323)

0.04%

(11,713,582)

0.01%

89,052,818

-0.09%

19,550,913

ORA

(4)

(57,788,323)

0.04%

(11,713,582)

0.01%

89,052,818

-0.09%

19,550,913

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

38

9-21

Excess Deferred Income Tax (RB)

SUBS

Overland

(1)

0

0.00%

12,800,000

-0.01%

38,400,000

-0.04%

51,200,000

ORA

(4)

0

0.00%

12,800,000

-0.01%

38,400,000

-0.04%

51,200,000

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

ORA

19

ASI - ADSL Development Cost Treatment (RB)

SUBS

Overland

0

0.00%

0

0.00%

0

0.00%

0

ORA

(3)

0

0.00%

(10,600,000)

-0.10%

(209,176,000)

-2.10%

(219,776,000)

TURN

(5)

0

0.00%

(10,600,000)

-0.10%

(209,176,000)

-2.10%

(219,776,000)

Pacific

(10)

0

0.00%

0

0.00%

0

0.00%

0

60a

20-20

Depreciation Expense Timing Adjustment (RB)

SUBS

Overland

(1)

0

0.00%

0

0.00%

1,728,488

0.00%

1,728,488

ORA

(2)

0

0.00%

0

0.00%

1,728,488

0.00%

1,728,488

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

70a

S6-1

LNP Capital Costs (RB)

SUBS

Overland

(1)

(14,315,457)

0.01%

(32,338,163)

0.03%

(42,836,992)

0.04%

(89,490,612)

ORA

(4)

(14,315,457)

0.01%

(32,338,163)

0.03%

(42,836,992)

0.04%

(89,490,612)

TURN

(5)

(14,315,457)

0.01%

(32,338,163)

0.03%

(42,836,992)

0.04%

(89,490,612)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

71a

10-17

AFUDC (RB)

SUBS

Overland

(1)

(2,327,000)

0.00%

(8,370,000)

0.01%

(12,964,000)

0.01%

(23,661,000)

S10-1

ORA

(2)

(2,327,000)

0.00%

(8,370,000)

0.01%

(12,964,000)

0.01%

(23,661,000)

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

72

S10-2

PBOP Pre-Funding Plant Adj. (RB)

SUBS

Overland

13,312,000

-0.01%

13,312,000

-0.01%

13,312,000

-0.01%

39,936,000

ORA

(2)

13,312,000

-0.01%

13,312,000

-0.01%

13,312,000

-0.01%

39,936,000

TURN

(6)

Pacific

(7)

0

0.00%

0

0.00%

0

0.00%

0

Net Income Effect of Audit Corrections

Overland

431,399,621

639,617,502

911,081,711

1,982,098,834

Net Rate Base Effect of Audit Corrections

Overland

(609,143,885)

(610,423,795)

(258,874,205)

(1,478,441,885)

Net Income As Reported On Pac Bell IEMR

652,499,328

922,472,419

962,198,083

Net Income Effect of Audit Corrections

Overland

431,399,621

639,617,502

911,081,711

Audit-Corrected Net Income

Overland

1,083,898,949

1,562,089,921

1,873,279,794

0

Rate Base As Reported On Pac Bell IEMR

10,057,147,720

10,170,676,085

9,963,602,286

Rate Base Effect of Audit Corrections

Overland

(609,143,885)

(610,423,795)

(258,874,205)

Audit-Corrected Rate Base

Overland

9,448,003,835

9,560,252,290

9,704,728,081

Rate of Return As Reported By Pacific Bell

6.49%

9.07%

9.66%

Rate of Return Impact of Audit Adjustments

Overland

4.98%

7.27%

9.65%

Audit-Corrected Rate of Return

Overland

11.47%

16.34%

19.30%

Net Income Effect of Audit Corrections

ORA

428,511,826

623,187,148

1,003,300,454

2,054,999,428

Net Rate Base Effect of Audit Corrections

ORA

(729,319,885)

(638,336,795)

(338,552,205)

(1,706,208,885)

Net Income As Reported On Pac Bell IEMR

652,499,328

922,472,419

962,198,083

Net Income Effect of Audit Corrections

ORA

428,511,826

623,187,148

1,003,300,454

Audit-Corrected Net Income

ORA

1,081,011,154

1,545,659,567

1,965,498,537

Rate Base As Reported On Pac Bell IEMR

10,057,147,000

10,170,675,000

9,963,602,000

Rate Base Effect of Audit Corrections

ORA

(729,319,885)

(638,336,795)

(338,552,205)

Audit-Corrected Rate Base

ORA

9,327,827,115

9,532,338,205

9,625,049,795

Rate of Return As Reported By Pacific Bell

6.49%

9.07%

9.66%

Rate of Return Impact of Audit Adjustments

ORA

5.10%

7.14%

10.76%

Audit-Corrected Rate of Return

ORA

11.59%

16.21%

20.42%

Net Income Effect of Retroactive Audit Corrections

PACIFIC

(12)

(7,438,454)

26,011,591

20,229,744

38,802,881

Net Income Effect of Audit Corrections in Year 2002

PACIFIC

(12)

36,855,318

17,879,942

8,268,949

63,004,209

Net Rate Base Effect of Audit Corrections

PACIFIC

(146,543,000)

(95,670,000)

(95,453,000)

(337,666,000)

Net Income As Reported On Pac Bell IEMR

652,499,328

922,472,419

962,198,083

Net Income Effect of Audit Corrections

PACIFIC

(7,438,454)

26,011,591

20,229,744

Audit-Corrected Net Income

PACIFIC

645,060,874

948,484,010

982,427,827

Rate Base As Reported On Pac Bell IEMR

10,057,147,000

10,170,675,000

9,963,602,000

Rate Base Effect of Audit Corrections

PACIFIC

(146,543,000)

(95,670,000)

(95,453,000)

Audit-Corrected Rate Base

PACIFIC

9,910,604,000

10,075,005,000

9,868,149,000

Rate of Return As Reported By Pacific Bell

6.49%

9.07%

9.66%

Rate of Return Impact of Audit Adjustments

PACIFIC

0.02%

0.34%

0.30%

Audit-Corrected Rate of Return

PACIFIC

6.51%

9.41%

9.96%

KEYS TO PRESENTATION:

A

The impact of the CPUC's income tax flowthrough policy on each adjustment is reflected with the adjustment.

B

The rate of return impact of individual adjustments is calculated using Pacific's reported rate base and operating income.

STATUS OF DISPUTE:

NONE

Adjustments recommended by Overland that are NOT disputed by Pacific.

AMT

Adjustments recommended by Overland that are disputed by Pacific in AMOUNT.

SUBS

Adjustments recommended by Overland that are disputed by Pacific in SUBSTANCE.

BOTH

Adjustments recommended by Overland that are disputed by Pacific BOTH in AMOUNT and in SUBSTANCE.

FOOTNOTES:

1

This adjustment, as proposed by Overland, has both an income and rate base impact.

2

Because ORA did not affirmatively address this issue in filed testimony, ORA is not contesting the adjustment quantification

presented by Overland and supported by the Audit Report.

3

ORA has presented an alternative adjustment quantification.

4

ORA presented testimony on this issue, but did not propose an alternative adjustment.

5

TURN's calculated adjustment includes only those issues TURN has addressed in its opening and reply brief.

TURN is not presenting total intrastate income, rate base and rate of return impacts for the limited set of issues TURN addressed.

6

On those issues TURN has not affirmatively addressed in briefs, TURN does not dispute the adjustment quantification

presented by Overland on behalf of the Telecommunications Division.

7

Because Pacific disputes the need for any adjustment for this issue, Pacific has not confirmed Overland's calculation.

8

Pacific's position is that this adjustment should be not be made retroactively, but rather in the current period (2002).

Accordingly, no rate of return impact is shown.

9

Pacific breaks this adjustment into eleven components, disputing some portions of the adjustment, but not all.

There is no disagreement on the break out.

10

Because Pacific disputes the need for any adjustment for this issue, Pacific has not confirmed ORA's calculation.

11

Based on information Pacific Bell provided for the first time in written testimony, the adjustment is no longer appropriate.

12

Pacific's position segregates the adjustments between those which should be applied retroactively to the IEMR

APPENDIX C

Index #

Rate Base or Income Stmt

Adjust Ref.

Report Chapter

Testimony Reference

Adjustment Description

Overland Position

ORA Position

TURN Position

Income Statement Adjustments

1

IS

REG-01

5 - 13

GH Reply 5

Unsupported Contingent Liabilities - Revenues (IS) - Increase revenues to eliminate unsupported and unauditable contingent liability accruals.

Pacific Bell did not provide the information needed to audit the contested accruals. The limited information provided by Pacific Bell demonstrated the accrual amounts were not reasonable.

Concur with Overland. Also concur with TURN re waiver of privilege and that liabilities should be accounted for on an as-paid basis.

Pacific Bell failed to demonstrate that providing the information needed to audit the contested accruals would constitute waiver of any privilege. Therefore, these liabilities should be accounted for on an as-paid basis.

2

IS

REG-02

5 -14

Bellcore Dividends (IS) - Increase 1997 revenues to correct an error in an IEMR ratemaking adjustment.

Pacific Bell admits this accounting error occurred and accepts the correction. Pacific Bell posted the Bellcore Dividends IEMR ratemaking adjustment in the wrong direction.

Concur with Overland

3

IS

REG-03

5 - 15

GH Reply 16

Uncollectible Revenues - RCRMS (PacBell flows through) (IS) - Reduce 1997 uncollectible accounts provision to eliminate costs that should have been accrued in 1996.

The information available at the end of 1996 was sufficient to support an accrual of the costs.

Concur with Overland

Index #

Rate Base or Income Stmt

Adjust Ref.

Report Chapter

Testimony Reference

Adjustment Description

Overland Position

ORA Position

TURN Position

4

IS

REG-04

5 - 19

Gain on Sale of Bellcore (IS) - Increase 1997 other operating income to correct an accounting error.

Pacific Bell accepts this correction. The CPUC allocated 50% of the gain on the sale of Bellcore to ratepayers and required a refund. Pacific Bell recorded the refund above the line. Therefore, 50% of the gain should have been recorded above-the-line. Pacific Bell recorded the entire gain below the line.

Concur with Overland

5

IS

REG-05

6 - 15, S6 - 1

GH Reply 2

Local Number Portability Costs (IS) - Reduce expense to correct a separations error.

Pacific Bell accepts the correction for periods after April 1998. The costs incurred prior to May 1998 are exclusively interstate costs that are recovered through an FCC tariff. IEMR reports should be revised when subsequent information reveals the separations treatment used in the original report was incorrect. In addition, Pacific Bell should have deferred the costs as a regulatory asset.

Concur with Overland

The costs incurred prior to May 1998 should have been deferred as a regulatory asset pursuant to FAS 71 requirements. Pacific Bell had sufficient information to estimate the probable amount of cost recovery in early 1996.

6

IS

REG-06

6 - 19

GH Open 4

Local Competition Costs (IS) - Reduce expense to correct an accounting error. Pacific Bell failed to recognize a regulatory asset.

The costs should have been deferred as a regulatory asset in November 1998 pursuant to FAS 71 requirements. Pacific Bell had sufficient information to estimate the probable amount of cost recovery in November 1998.

ORA generally concurs with Overland that these costs should be removed from the audit period. The Commission has established a mechanism to allow SBC Pacific to recover these costs through intrastate rates, beginning in 2001. Absent these adjustments, the Company could over-recover these costs from ratepayers.

The costs incurred during the audit period should have been deferred as a regulatory asset pursuant to FAS 71 requirements. Pacific Bell had sufficient information to estimate the probable amount of cost recovery no later than early 1996.

7

IS

REG-07

6 - 22

GH Reply 10

Merger Savings Allocation (IS) - Modify IEMR ratemaking adjustment to correct errors and reflect the SBC/Pacific Telesis merger savings forecast adopted by the CPUC.

The timing of the IEMR ratemaking adjustments should reflect the merger savings forecast adopted by the CPUC in the Merger Decision.

Concur with Pacific Bell

8

IS

REG-08

6 - 27

Advanced Communications Network (IS) - Reduce expense to eliminate plant abandonment costs that should have been charged below-the-line.

Pacific Bell accepts this correction. Pacific Bell recorded part of the abandonment costs for this project above-the-line. The costs should have been charged to below-the-line accounts.

Concur with Overland

9

IS

REG-09

6 - 31

GH Reply 9

Software Buy-Out Agreement (IS) - Reduce expense to correct accounting for restructuring of contract payment obligations.

The substance of the contract buy-out was the advance payment of an operating expense in exchange for a price reduction. Advance payments of operating expenses should charged to prepaid asset accounts under the FCC's Uniform System of Accounts. Pacific Bell charged the buy-out payment obligation directly to expense. Pacific Bell should have deferred the buy-out payment as a prepaid asset and amortized the prepayment over the payment period specified in the original contract.

Concur with Overland

10

IS

REG-10

6 - 32

GH Reply 5

Unsupported Contingent Liabilities - Operating Expense (IS) - Reduce expenses to eliminate unsupported and unauditable contingent liability accruals.

Pacific Bell did not provide the information needed to audit the contested accruals. The limited information provided by Pacific Bell demonstrated the accrual amounts were not reasonable.

Concur with Overland

Pacific Bell failed to demonstrate that providing the information needed to audit the contested accruals would constitute waiver of any privilege. Therefore, these liabilities should be accounted for on an as-paid basis.

11

IS

REG-11

6 - 34

Incentive Pay Accrual (IS) - Adjust TEAM award accruals to equal actual payouts.

Team award accrual amounts and payout levels are both completely within the control of management. Therefore, audit adjusted expenses should reflect the actual payout level rather than the estimates accrued by Pacific Bell.

Concur with Overland

12

IS

REG-12

6 - 37

ISP-Bound Traffic Separations (IS) - Increase 1997 expense to correct separations error.

Pacific Bell accepts this correction. The FCC determined that Pacific Bell's separations treatment of internet bound traffic was improper and required Pacific Bell to retroactively revise its 1997 FCC IEMR. Pacific Bell did not revise its 1997 CPUC basis IEMR.

Concur with Overland

13

IS

REG-13

6 - 36

Uncollectible Settlements - RCRMS (IS) - Reduce expense to eliminate contract billing settlements that should have been accrued in 1996.

The information available at the end of 1996 was sufficient to support an accrual of the costs.

Concur with Overland

14

IS

REG-14

7 - 9, S7- 13

Pension Expense (IS) - Reduce expense to reflect the CPUC's pension accounting policy.

Phase 2A issue

Concur with Overland

15

IS

REG-15,16,17

7 - 13

SFAS 106 (IS) - Reduce expense to reflect the CPUC's PBOP accounting policy.

Phase 2A issue

Concur with Overland

15

IS

REG-15,16,17

7 - 13, S7 - 6

SFAS 106 - Pension Trust Withdrawal (IS) - Reduce PBOP expense to reflect the CPUC's policy concerning pension trust withdrawals

Phase 2A issue

Concur with Overland

16

IS

REG-18

7 - 33

GH Reply 18

SFAS 112 (IS) - Reduce 1997 FAS 112 expense to eliminate impact of a prior period accounting error.

Pacific Bell admits the accounting error occurred. Audit corrected expenses should reflect compliance with CPUC accounting rules in all periods, including periods prior to the audit period. Recorded expenses should be adjusted to eliminate the impact of accounting errors made in prior periods.

Concur with Overland

17

IS

REG-19

8 - 6

GH Reply 17

Intrabuilding Cable Amortization (IS) - Reduce 1997 and 1998 depreciation expense to eliminate impact of a prior period accounting error.

Pacific Bell admits the accounting error occurred. Audit corrected expenses should reflect compliance with CPUC accounting rules in all periods, including periods prior to the audit period. Recorded expenses should be adjusted to eliminate the impact of accounting errors made in prior periods.

Concur with Overland

18

IS

REG-20

8 - 7

SAVR Delayed Retirements (IS) - Reduce depreciation expense to reflect corrected plant balances. Pacific Bell failed to record retirements on a timely basis.

The failure to record retirements on a timely basis is an accounting error. Audit corrected expenses should reflect compliance with CPUC accounting rules.

Concur with Overland

19

IS

REG-21

8 - 7

SAVR Reverse Retirements (IS) - Reduce depreciation expense to reflect corrected plant balances. The reverse retirements recorded by Pacific Bell were improper.

Pacific Bell's decision to record reverse retirements was not reasonable. Pacific Bell's contention that the book to physical inventory differences were caused by accidental premature book retirements of equipment is not plausible.

Concur with Overland

20

IS

REG-22

8 - 8, S8 - 1

GH Open 3

Equal Access IEMR Ratemaking Adjustment (IS) - Increase 1998 Depreciation expense to correct an error made in an IEMR ratemaking adjustment.

Pacific Bell accepts this correction. Pacific Bell made a computational error when calculation this IEMR ratemaking adjustment for 1998.

Concur with Overland

21

IS

REG-23

8 - 12

Reserve Deficiency Amortization (IS) - Reduce 1999 depreciation expense to eliminate reserve deficiency amortization.

Phase 2A issue

Concur with Overland

22

IS

REG-24

9 - 22

Ameritech Income Tax Misclass (IS) - Reduce 1999 current income tax expense to correct an accounting error. The provision should have been charged below-the-line.

Pacific Bell charged Ameritech merger severance accrual to below-the-line accounts for book purposes. Therefore, the resulting book/tax temporary difference should be classified as a nonoperating temporary difference. This correction only addresses the current income tax treatment of the temporary difference. The deferred income tax treatment of the temporary difference is addressed in the Phase 2A income tax normalization correction.

Concur with Overland

23

IS

REG-25

9 - 11, S9 - 3 & 5

Income Tax Normalization (IS) - Reduce deferred income tax expense to reflect the CPUC's flow-through income tax accounting policy.

Phase 2A issue

Concur with Overland

24

IS

REG-26

9 - 21, S9 - 6

Excess Deferred Income Tax (IS) - Reduce deferred income tax expense to correct an accounting error.

Pacific Bell admits this accounting error occurred and does not contest the amount of the correction. Pacific Bell failed to record amortization of excess deferred income taxes in 1998 and 1999.

Concur with Overland

25

IS

REG-27

9 - 24

Sales and Use Tax Accrual (IS) - Increase sales and use tax expense to eliminate unsupported accruals.

Pacific Bell did not provide the information needed to audit the accruals.

Concur with Overland

26

IS

REG-28

9 - 24

GH Reply 18

Employment Tax Error (IS) - Decrease 1999 payroll taxes to eliminate impact of prior period accounting error.

Pacific Bell admits the error occurred. Audit corrected expenses should reflect compliance with CPUC accounting rules in all periods, including periods prior to the audit period. Recorded expenses should be adjusted to eliminate the impact of accounting errors made in prior periods.

Concur with Overland

39

IS

AFF-01

15 - 18

SBC Ops FAS 106 Merger Conforming Expense (IS) - Removes a post-retirement benefits accrual incurred as a result of the Ameritech merger from Pacific Bell's regulated accounts.

Consistent with the discussion concerning AFF-16, an adjustment has been proposed for amounts charged by SBC Operations which were not caused by and did not benefit Pacific Bell. This is a baseline requirement for regulated cost recovery per D.86-01-026 (p. 36).

Concur with Overland

40

IS

AFF-02

15 - 19

RW Reply 4

AMDOCS Awards SBC Operations (IS) - Removes identifiable portions of AMDOCs and Ameritech merger executive awards charged to Pacific Bell by SBC Operations.

Consistent with the discussion concerning AFF-08, an adjustment has been proposed for amounts charged by SBC Operations which were not caused by and did not benefit Pacific Bell. This is a baseline requirement for regulated cost recovery per D.86-01-026 (p. 36).

Concur with Overland

41

IS

AFF-03

15 - 20

RW Reply 2, 3; GO Reply 2

Excess Executive Compensation SBC Operations (IS) - Removes amounts exceeding the inflation-adjustment CPUC limit for regulated recovery of executive compensation expense, including salaries and certain severance charged to Pacific Bell by SBC Operations.

Consistent with the discussion concerning AFF-08, an adjustment has been proposed for amounts charged by SBC Operations that were in excess of the inflation-adjusted executive compensation limits established in D.86-01-026 (p. 163).

Concur with Overland

42

IS

AFF-04

15 - 21

SBC Ops Sec. Alloc of Parent Mgt Fees (IS) - Removes parent company "management fees" charged to Pacific Bell indirectly through SBC Operations.

The SBC "management fees" are unsupported by cost and are additional to the parent company's recovery of fully distributed costs through corporate allocations. They should not have been charged to Pacific Bell (according to the auditors performing the FCC Cost Allocation Manual audit) and are not recoverable through regulated expense.

Concur with Overland

43

IS

AFF-05

15 - 22

SBC Ops Call Ctr Depreciation, Merger Implmntatn Exp (IS) - Removes certain call center costs, including depreciation, charged by SBC Operations to Pacific Bell's regulated accounts.

SBC Operations allocated excessive call center depreciation expense and costs associated with centralizing the telemarketing function to Pacific Bell in 1998. This reduces Pacific Bell's call center cost allocation to a level consistent with that used to allocate 1998 recurring costs related to the call centers.

Concur with Overland

44

IS

AFF-06

16 - 18

RW Reply 2, 3; GO Reply 2

SBC Svcs "Excess" Executive Comp Exp (IS) - Removes identifiable portions of AMDOCs and Ameritech merger executive awards charged to Pacific Bell by SBC Services.

Consistent with the discussion concerning AFF-08, an adjustment has been proposed for amounts charged by SBC Operations which were not caused by and did not benefit Pacific Bell. This is a baseline requirement for regulated cost recovery per D.86-1-026 (p. 36). In addition, these costs were in excess of the inflation-adjusted executive compensation limits established in D.86-01-026 (p. 163).

Concur with Overland

45

IS

AFF-07

16 - 19

SBC Svcs, CFL, TRI Sec.Alloc. of Parent Mgt Fees (IS) - Removes parent company "management fees" charged to Pacific Bell indirectly through charges from SBC Services, Technology Resources and Center for Learning.

The SBC "management fees" are unsupported by cost and are additional to the parent company's recovery of fully distributed costs through corporate allocations. They should not have been charged to Pacific Bell (according to the auditors performing the FCC Cost Allocation Manual audit) and are not recoverable through regulated expense.

Concur with Overland

46

IS

AFF-08

14 - 9

RW Reply 2

Parent "Excess" Executive Compensation Expense (IS) - 1) Removes identifiable portions of AMDOCs and Ameritech merger executive awards charged to Pacific Bell by the parent company. 2) Removes parent company executive compensation exceeding the inflation-adjustment CPUC limit for regulated recovery, including salaries, certain severance and post-retirement "consulting" fees and supplemental retirement income plan (SRIP) expense.

D.86-01-026 established certain baseline requirements for regulated cost recovery of parent and affiliate costs. One of these requirements was that to be recoverable as a regulated cost, parent company charges must provide a "direct and primary benefit" to telephone company customers (p. 36). The executive awards charged to Pacific Bell were not caused by and did not benefit Pacific Bell. One was attributable to affiliate Ameritech and the other to affiliate AMDOCs. In addition, the salaries and severance amounts adjusted were amounts exceeding the inflation-adjustment limit for regulated recovery of executive compensation expense established in Decision 86-01-026 (p. 163) Finally, in addition to exceeding the CPUC compensation limit, the SRIP expense, limited to a few top executives, was charged to Pacific Bell, but a much greater amount of offsetting SRIP income (the funding for the plan) was retained by SBC.

Concur with Overland

47

IS

AFF-09

14 - 23

RW Reply 6

Parent Political and Legislative Influence Expense (IS) - Removes political and legislative influence costs incurred by the California External Affairs department of SBC / PTG and charged to Pacific Bell's regulated accounts.

The CPUC adopted the FCC Uniform System of Accounts (USOA) in D.87-12-063. The USOA specifically requires "lobbying" expenditures to be recorded below-the-line in account 7370 - Special Charges. This adjustment brings the accounting for political and legislative influence costs into compliance with CPUC accounting requirements. In addition, contrary to the requirements of D.86-01-026 for regulated cost recovery (p. 36), these costs are incurred for the benefit of SBC executives and SBC shareholders, not Pacific Bell customers.

Concur with Overland

48

IS

AFF-10

14 - 26

RW Reply 7

Parent Legal Expense (IS) - Removes minor amounts of allocated corporate legal costs associated with entry into the non-regulated, interLATA long distance service market and SBC's intervention to slow down / prevent the approval of a merger of two potential local exchange competitors (AT&T and Media One).

Pacific Bell's allocation of corporate legal cost increased dramatically after SBC took over PTG. Overland was unable to audit corporate legal costs because SBC did not maintain, or would not provide, information regarding the nature of most of the costs. The amounts adjusted were associated with specific cases handled by outside attorneys and were exceptions in which we had cost descriptions. The costs were adjusted because they were not attributable to Pacific Bell's regulated operations. We made no attempt to adjust amounts from the majority of corporate legal expenses that we were unable to evaluate.

Concur with Overland

Pacific Bell failed to demonstrate that the legal costs in question were appropriately assigned to its regulated operations, particularly for the AT&T/Media One merger.

49

IS

AFF-11

14 - 34

RW Reply 2, 4

Parent Public Relations & Corporate Sponsorship Exp (IS) - This adjustment removes public relations consulting and corporate sports and cultural expenses allocated by SBC to Pacific Bell's regulated accounts.

The CPUC noted in D.86-01-026 that institutional or image building advertising would not be allowed for regulated cost recovery (p. 41) In the same decision, the CPUC determined that public relations expense was a form of "institutional advertising" which did not warrant ratemaking recognition (pp. 41-42). As such, CPUC policy prohibits regulated recovery of both of these costs.

Concur with Overland

50

IS

AFF-12

14 - 33

RW Reply 8

Parent Corporate Development Expense (IS) - Removes "corporate development" costs of investigations and due diligence on potential foreign investments and various projects unrelated to providing regulated telephone service charged by SBC to Pacific Bell and recorded in Pacific Bell's accounts.

D.86-01-026 established a baseline requirement that parent company charges must provide "direct and primary benefit" to telephone company customers in order to be recoverable as a regulated cost (p. 36). These costs were not attributable to Pacific Bell and provided no contribution or benefit to regulated local exchange telephone operations. The costs were not attributable to Pacific Bell's regulated operations; rather they were incurred for the benefit of SBC and its shareholders.

Concur with Overland

51

IS

AFF-13

14 - 35

RW Reply 2, 4

Parent Strategic Planning Expense (IS) - Removes corporate "strategic planning" expense.

The CPUC's policy to exclude corporate "strategic planning" expense from regulated customer recovery was set forth in Decision 86-01-026 (pp. 46-47). Pacific Bell / SBC refused to provide the materials necessary to evaluate these costs so that a determination could be made as to the extent they might have benefited Pacific Bell's regulated local exchange operations.

Concur with Overland

52

IS

AFF-14

14 - 38

RW Reply 9

Parent Contributions, Memberships, Foundation Exp (IS) - Removes contributions and membership costs incorrectly included in Pacific Bell's regulated accounts.

The FCC Uniform System of Account (USOA) as adopted by the CPUC in D.87-12-063 prohibits these costs from being recorded in above-the-line regulated accounts.

Concur with Overland

53

IS

AFF-15

14 - 39

RW Reply 9

Parent Out of Period Expense (IS) - Reclassifies 1997 corporate allocations incorrectly charged to 1998 expense back to 1997 expense.

Although recorded on the 1998 books, journal vouchers for the cost clearly indicate that the cost was associated with 1997. Inclusion in 1998 would result in 13 months of corporate allocations charged for 1998, and only 11 for 1997. The costs should be placed in the proper period.

Concur with Overland

54

IS

AFF-16

14 - 40

Parent Merger Conforming Expense (IS) - Removes a post-retirement benefits accrual incurred as a result of the Ameritech merger from Pacific Bell's regulated accounts.

D.86-01-026 requires that parent company charges must provide "direct and primary benefit" to telephone company customers to be recoverable as a regulated cost (p. 36). Most amounts SBC incurred in consummating the Ameritech merger were correctly retained by the corporation. This amount, which represents a cost to conform Pacific's and Southwestern Bell's post-retirement benefits accounting with that of Ameritech, was improperly charged to Pacific Bell instead of being retained even though it provided no benefit to Pacific Bell's telephone company customers.

Concur with Overland

55

IS

AFF-17

14 - 41

Parent Impact of Adjustmts on Billings to PBD (IS) - This adjustment removes corporate allocations from SBC discussed in AFF-08 through AFF-16 above that were indirectly charged to Pacific Bell's IEMR earnings because they were charged to Pacific Bell Directory.

SBC charged costs to Pacific Bell Directory as well as to Pacific Bell. Both sets of allocations impact Pacific Bell's IEMR earnings. This adjustment reflects the effect of the sum of adjustments to corporate allocations that flow to Pacific Bell's IEMR earnings indirectly through allocation to Pacific Bell Directory.

Concur with Overland

56

IS

AFF-18

14 - 41

RW Reply 2

MSI USA "Excess" Executive Comp Billed Directly (IS) - Removes the identifiable portion of corporate executive compensation associated with executives assigned to affiliate MSI USA.

See the discussion of executive compensation for adjustment AFF-08 above. MSI-USA was a corporate entity created to employ former Southwestern Bell region executives and managers in the Pacific Bell region after the merger. Their separation from other Pacific region entities was done to enable them to maintain their Southwestern region benefits packages.

Concur with Overland

57

IS

AFF-19

17 - 18

RW Reply 10

Parent PB Employee Trsfr Fees Billed Back to PB (IS) - This adjustment removes CPUC employee transfer fees charged by Pacific Bell to SBC that SBC charged back to Pacific Bell.

In D.87-12-067 (Conclusion of Law 35), the CPUC concluded that SBC affiliates are required to pay Pacific Bell a 25 percent-of-salary fee when employees are transferred from Pacific Bell to affiliates. SBC incorrectly charged the cost of some of these fees back to Pacific Bell, effectively canceling them. This adjustment reverses the charge back.

Concur with Overland

58

IS

AFF-20

17 - 18

RW Reply 10

Fees for Employees Transferred in 1999 (IS) - Adds employee transfer fee revenue for a large transfer of employees from Pacific Bell to SBC Services that Pacific Bell reported to the CPUC in 1999.

Subsequent to the audit report, Pacific Bell provided evidence to show that the transfers it reported to the CPUC as having occurred in 1999 actually occurred in 2000. The evidence provided showed that the transfer fee revenue was recognized in 2000. Based on the additional evidence, this adjustment is no longer necessary.

Concur with Overland

59

IS

AFF-21

18 - 2 &7

Nevada Bell Net Directory Revenue (IS) - This adjustment reduces Pacific Bell Directory's IEMR earnings contribution by correcting the allocation of PBD's earnings between Pacific Bell and Nevada Bell.

Pacific Bell is required to reflect the California earnings of Pacific Bell Directory in its CPUC IEMR earnings calculation. The Directory earnings were improperly overstated on the IEMR report due to an improper allocation of Directory earnings between Nevada and California Directory operations in the IEMR directory earnings calculation. This adjustment corrects the calculation mistake.

Concur with Overland

ORA

IS

ADSL Development Costs - This adjustment removes ADSL development costs and increases Pacific Bell's IEMR net earnings.

The net ADSL development costs should be moved below-the-line. A corresponding ratebase adjustment should be made as well.

Pacific Bell should not be allowed to recover development costs through NRF rates, then transfer the ADSL service so that future revenues from that service are not reflected in the IEMR. Instead, the ADSL development costs should be removed from the IEMR during the audit period.

60b

IS

NR-01

20 - 20

GO Reply 10

Depreciation Expense Timing Adjustment (IS) - The allocation between regulated and non-regulated activities was not correct on a year-to-date basis. This entry corrects this error.

When correcting a depreciation expense error in December 1999, Pacific Bell employed current regulated / non-regulated allocation ratios which were not reflective of the actual ratios in use at the time when the errors were originally recorded.

Concur with Overland

61

IS

NR-02

20 -22

GO Reply 10

Advertising Direct Assignment and Common Allocations (IS) - Directly assigns and allocates these costs to the appropriate regulated and non-regulated activities to the extent possible.

Instead of allocating product advertising expense billed by the Parent to the Pacific Bell service or customer category for which it was incurred, Pacific Bell allocated these costs based on the regulated and non-regulated time assignments of a very small number of Pacific Bell administrative employees. As a result, these costs were not allocated between regulated and non-regulated activities in accordance with attributable cost principles as set out in FCC Part 64 (adopted by the CPUC in D.91-07-056).

Concur with Overland

62

IS

NR-03

20 - 31

GO Reply 10

Customer Service Non-Productive Salary Allocations (IS) - Corrects the allocation of service labor to non-regulated activities.

Non-productive customer service labor was not allocated to non-regulated activities in the same proportion as productive labor costs.

Concur with Overland

63

IS

NR-04

20 - 37

RW Reply 14; GO Reply 9

Affiliate Marketing Services Revenue (IS) - Increases affiliate marketing services revenue to the same level as the associated expenses.

Pacific Bell employed two different systems to account for the revenues and expenses associated with the sales functions performed by Pacific Bell customer service representatives on behalf of its affiliates. Although the revenues should have been at least equal to the expenses for these services, expenses were significantly greater than revenues. Pacific Bell could not provide a credible explanation for this discrepancy.

Concur with Overland. Additionally, adjustment should recognize 10% markup of FDC pursuant to CPUC affiliate rules.

64

IS

NR-05

20 - 48

Non-regulated Tracking Code Direct Assignment Errors (IS) - Corrects the allocation of costs between regulated and non-regulated activities.

Tracking codes were a primary tool used by Pacific Bell in allocating costs between regulated and non-regulated activities. During our review, we noted several instances in which tracking codes identified as non-regulated in nature were actually allocated on a different basis. By disregarding the true nature of the costs when allocating between regulated and non-regulated activities, Pacific Bell was in non-compliance with D.91-07-056 (Finding of Fact 11).

Concur with Overland

65

IS

NR-06

20 - 48

GO Reply 9

National-Local Strategy Implementation (IS) - Corrects the allocation of costs associated with offering competitive local exchange services.

D.91-07-056 (Finding of Fact 11) establishes a cost-attribution hierarchy beginning with direct assignment of costs when possible. Pacific Bell chose to jointly allocate the implementation costs of offering competitive local exchange service outside of the Pacific Bell franchise territory between regulated and non-regulated activities. However, a Pacific Bell affiliate is responsible for this initiative and should have been allocated all of these costs.

Concur with Overland

66

IS

NR-07

20 - 25

1997 Corporate Sponsorship Costs (IS) - Corrects the below-the-line treatment of corporate advertising and sponsorship payments associated with the naming rights of Pacific Bell Park.

Corporate advertising and sponsorship payments associated with the naming rights of Pacific Bell Park were charged to regulated activities. CPUC policy established in Decision 86-01-026 (p. 41) prohibits regulated expense recovery of these expenses.

Concur with Overland

67

IS

NR-08

20 - 50

Customer Premise Equipment Costs (IS) - Corrects the allocation of certain costs associated with customer premise equipment.

Certain costs associated with customer premise equipment was not appropriately identified by tracking code. As a result, these costs incorrectly defaulted to regulated operating expense rather than non-regulated expense as intended by the FCC and CPUC.

Concur with Overland

68

IS

REG-41; Supp 5

S5 - 1

GH Open 2

PIU Accrual (IS) - Reduce 1997 revenues to eliminate settlement amount that should have been accrued in 1996.

Pacific Bell had sufficient information to accrue the settlements in 1996.

Concur with Overland

69

IS

REG-42; Supp 5

S5 - 2

GH Open 2

USOAR Turnaround Accrual (IS) - Reduce 1997 revenues to correct over-accrual of regulatory liability in 1996. The reversal of the recorded liability in 1997 overstated 1997 revenues.

The entries recorded in 1997 to reverse the prior-period over-accrual distort 1997 operating revenues. The correction reduces 1997 revenues to eliminate that distortion.

Concur with Overland

70b

IS

REG-43; Supp 6

S6 - 1

GH Open 2

LNP Depreciation (IS) - Reduce depreciation expense to correct a separations error.

The depreciation expense for the plant costs recovered through the FCC LNP tariff should be directly assigned to the interstate jurisdiction.

Concur with Overland

The costs incurred prior to May 1998 should have been deferred as a regulatory asset pursuant to FAS 71 requirements. Pacific Bell had sufficient information to estimate the probable amount of cost recovery in early 1996.

71b

IS

REG-44; Supp 10

10 - 17, S10 - 1

AFUDC Depreciation Expense (IS) - Reduce depreciation expense to reflect corrected plant balances. The AFUDC recorded by Pacific Bell during the audit period was overstated.

The CPUC basis AFUDC charged to plant during the audit period was excessive. Pacific Bell's AFUDC rate calculations violated Resolution RF-4. Pacific Bell's practice of imputing negative capital sources in its AFUDC rate calculations does not have any basis in regulatory, finance or accounting theory. This correction is directly related to the AFUDC rate base correction.

Concur with Overland

Rate Base Adjustments

27

RB

REG-29

11 - 5, S11 - 5

GH Reply 13

Cash Working Capital (RB) - Reduce cash working capital allowance to correct errors and to reflect audit adjusted expenses.

Adjusts cash working capital allowance to correct 20 errors made in Pacific Bell's lead-lag studies and to reflect audit adjusted expenses.

Concur with most of Overland's adjustments. Also note that Pacific Bell included non-cash items, such as depreciation expense, in CWC calculation, which results in overstatement of rate base. The CWC would be negative if the non-cash items were removed. ORA recommends that CWC instead be set equal to zero. The result is similar to the three-year average rate base effect presented by Overland, and greatly simplifies the IEMR process.

The cash working capital allowance should be set equal to zero for IEMR purposes, the most reasonable option given the considerable doubt as to the accuracy or reasonableness of the utility's cash working capital calculations.

28

RB

REG-30

11 - 28

GH Open 12

Prepaid Directory Expense (RB) - Include prepaid directory expense in rate base.

Rate base should reflect Pacific Bell's actual investment in providing service. Prepaid directory expense represents an investment in providing service that should be included in rate base. D.91-07-056 does not prohibit the correction.

Concur with Overland

29

RB

REG-31

11 - 30

GH Open 12, GH Reply 19

SFAS 112 Liability (RB) - Deduct SFAS 112 liability from rate base.

The accrued SFAS 112 liability represents non-investor supplied capital that should be deducted from rate base. D.91-07-056 does not prohibit the correction.

Concur with Overland

30

RB

REG-32

11 - 31

GH Open 12, GH Reply 19

Vacation Liability (RB) - Deduct accrued vacation liability from rate base.

The accrued vacation liability represents non-investor supplied capital that should be deducted from rate base. D.91-07-056 does not prohibit the correction.

Concur with Overland

31

RB

REG-33

11 - 31

GH Open 12

SFAS 106 Accrued Liability (RB) - Deduct accrued SFAS 106 liability from rate base. Amount depends on resolution of SFAS 106 expense correction.

The accrued SFAS 106 liability represents non-investor supplied capital that should be deducted from rate base. D.91-07-056 does not prohibit the correction.

Concur with Overland

32

RB

REG-34

11 - 34

GH Open 12

Accrued Contingent Liability (RB) - Deduct accrued contingent liabilities from rate base. Amount depends on resolution of expense correction for unauditable contingent liabilities.

Accrued contingent liabilities represent non-investor supplied capital that should be deducted from rate base. D.91-07-056 does not prohibit the correction.

Concur with Overland

33

RB

REG-35

11 - 28, S11 - 6

GH Open 12, GH Reply 19

Prepaid Pension Costs (RB) - Include prepaid pension asset in rate base. Amount depends on resolution of Phase 2A pension expense correction.

Prepaid pension assets represent an investment in providing service that should be included in rate base. D.91-07-056 does not prohibit the correction.

Concur with Overland

34

RB

REG-36

10 - 22

GH Open 3

SFAS 106 Plant (RB) - Reduce 1998 and 1999 plant to reflect CPUC PBOP accounting policy.

Directly related to Phase 2A PBOP expense correction. Pacific Bell wrote-off PBOP regulatory asset in 1998. That write-off included the elimination of a large rate base credit. The Phase 2A PBOP correction reverses the expense impact of the write-off. This correction eliminates the rate base impact of the write-off. The rate base correction should be adopted if the Phase 2A PBOP expense correction is adopted.

Concur with Overland

35

RB

REG-37

10 - 22, S10 - 3

Restructure Reserve (RB) - Reduce net plant to eliminate unsupported and unreasonable jurisdictional adjustment.

Pacific Bell's recorded plant balances include a jurisdictional adjustment for the impact of a 1993 restructuring reserve. The FCC and CPUC accounting treatment of the restructuring reserve was identical. Therefore, there is no basis for the recorded jurisdictional adjustment. Pacific Bell admits it cannot support the jurisdictional adjustment recorded on its books or explain what the adjustment represents..

Concur with Overland

36

RB

REG-38

10 - 23

Accumulated Reserve for Depreciation (RB) - Adjust depreciation reserve to reflect depreciation expense corrections.

Directly related to depreciation expense corrections. This correction adjusts rate base to reflect impact of depreciation expense corrections on accumulated reserve for depreciation.

Concur with Overland

37

RB

REG-39

9 - 23

Accumulated Deferred Income Tax (RB) - Adjust accumulated deferred income taxes to reflect the CPUC's flow-through income tax accounting policy.

The rate base correction should reflect the resolution of the income tax normalization issue in Phase 2A.

Concur with Overland

38

RB

REG-40

9 - 21

Excess Deferred Income Tax (RB) - Adjust Accumulated deferred income taxes to correct accounting error.

This correction is directly related to the income statement correction for excess deferred income tax amortization. The rate base correction should be made if the income statement correction is adopted.

Concur with Overland

ORA

RB

Remove ADSL Development Costs

See corresponding description of income statement adjustment above.

Pacific Bell should not be allowed to recover development costs through NRF rates, then transfer the ADSL service so that future revenues from that service are not reflected in the IEMR. Instead, the ADSL development costs should be removed from the IEMR during the audit period.

60a

RB

NR-01

20 - 20

GO Reply 10

Depreciation Expense Timing Adjustment (RB) - The allocation between regulated and non-regulated activities was not correct on a year-to-date basis. This entry corrects this error.

Contrary to the cost attribution hierarchy adopted by the CPUC in D.91-07-056 (Finding of Fact 11), when correcting a depreciation expense error in December 1999, Pacific Bell employed current regulated / non-regulated allocation ratios which were not reflective of the actual ratios in use at the time when the errors were originally recorded.

Concur with Overland

70a

RB

REG-43; Supp 6

S6 - 1

GH Open 2

LNP Capital Costs (RB) - Reduce net plant to correct a separations error.

The plant costs recovered through the FCC LNP tariff should be directly assigned to the interstate jurisdiction.

Concur with Overland

The costs incurred prior to May 1998 should have been deferred as a regulatory asset pursuant to FAS 71 requirements. Pacific Bell had sufficient information to estimate the probable amount of cost recovery in early 1996.

71a

RB

REG-44; Supp 10

10 - 17, S10 - 1

GH Open 3

AFUDC (RB) - Reduce net plant to correct an accounting error. The AFUDC rates used by Pacific Bell were overstated.

The CPUC basis AFUDC charged to plant during the audit period was excessive. Pacific Bell's AFUDC rate calculations violated Resolution RF-4. Pacific Bell's practice of imputing negative capital sources in its AFUDC rate calculations does not have any basis in regulatory, finance or accounting theory. This correction is directly related to the AFUDC depreciation correction.

Concur with Overland

72

RB

REG-45; Supp 10

S10 - 2

GH Open 3

PBOP Pre-Funding Plant Adj. (RB) - Reduce net plant to eliminate unsupported and unreasonable jurisdictional adjustment.

Pacific Bell's recorded plant balances include a jurisdictional adjustment for the capitalized portion of contributions it made to its PBOP trusts in 1989 and 1990, prior to the adoption of FAS 106. The proper FCC and CPUC basis accounting for the contributions was identical Therefore, there is no basis for the jurisdictional adjustment and it should be eliminated. Pacific Bell properly charged the contributions to expense for FCC purposes. Pacific Bell improperly accounted for contributions as prepaid PBOP assets for CPUC purposes. Pacific Bell's CPUC basis accounting violated CPUC accounting policy and was inconsistent with its accounting for similar contributions made to other PBOP trusts.

Concur with Overland

APPENDIX D


Revenues and Other Operating Income Adjustments
Bellcore Dividends Index #2¹	$3,883,507
Gain on Sale of Bellcore Index #4	9,122,587
Operating Expenses
ACN Shutdown Costs Index #8	17,846,219	4,284,040	2,226,486
ISP-Bound Traffic Separations Index #12	(11,329,359)
Depreciation Accounting
Equal Access IEMR Ratemaking Adjustment Index #20		(6,477,055)
Affiliate Transactions²
SBC Operations Merger Conforming Expense Index #39			1,656,603
SBC Operations Secondary Allocation of Parent Management Fees Index #42		291,835	270,743


SBC Operations Call Center Depreciation and Merger Implementation Expense Index #43		237,025
SBC Services, CFL and TRI Allocation of Parent Management Fees Index #45		265,789	216,392
Parent Political and Legislative Influence Expense Index #47	8,574,885	10,009,837	4,186,554
Parent Contributions, Memberships and Foundation Expense Index #52	161,013	657,620	3,067,831
Parent SFAS 106 Merger Conforming Expense Index #54			454,553
Parent Impact on Pacific Bell Directory - Contributions and Memberships Index #55a	75,500	259,236	195,782
Parent Impact on Pacific Bell Directory - Lobbying Expense Index #55e	389,744	729,081	881,323
Parent Impact on Pacific Bell Directory - Parent Management Fees Index #55j		1,145,479	1,248,344
Parent Impact on Pacific Bell Directory - Employee Transfer Fees Index #55k	58,754
Parent Employee Transfer Fees Billed Back to Pacific Index #57	626,616
Nevada Bell Net Directory Revenue Index #59			(11,253,000)
Regulated and Nonregulated Cost Allocations
Nonregulated Tracking Code Assignment Error Index #64	7,398	4,250,163	3,237,874
Customer Premises Equipment Costs Index #67		10,097,537	3,467,830

APPENDIX E

APPENDIX E

Topics for Continued Affiliate Transactions Audit

1. Audit of the process Pacific uses for centralized tracking of legal matters. (Audit Report at 13-3, 14-25 to 14-26, Pacific's Opening Brief at 126-27).³

2. Audit of Pacific's claims that it analyzes costs using the Part 64 cost hierarchy (Audit Report at 12-3, Pacific's Opening Brief at 130-31.)

3. Audit of the enhancements that Pacific states will ensure proper Part 32 accounting classification of parent company costs. (Audit Report at 13-3, 13-17, 13-21; Pacific's Opening Brief at 132.)

4. Audit of the record-keeping and document retention efforts of the SBC shared service affiliates doing business with Pacific. (Audit Report at 15-2 to 15-3; Pacific's Opening Brief at 132-33.)

5. Audit of charges to affiliates for services provided by Pacific Bell. (Audit Report at 17-1 - 17-3 et seq.; Pacific's Opening Brief at 138-42.)⁴

6. Audit of fairness of Pacific's fully distributed cost rates. (Audit Report at 17-12 - 17-14; Pacific's Opening Brief at 140-41.)

7. Audit of whether Pacific Bell Directory is following Commission rules regarding purchases from AMDOCS, an SBC software subsidiary. (Audit Report at 18-2; Pacific's Opening Brief at 142.)

8. Audit to determine the correct levels of revenues and expenses to which the 10% mark-up for marketing services billings to unregulated affiliates should be applied. (Audit Report at 20-6; Pacific's Opening Brief at 169.)

9. Audit of Pacific's transactions involving its sharing of customer information, data bases and proprietary information with affiliates, and assessment of potential for cross subsidies relating to such transactions. (Audit Report at 12-3, 12-6,12-7, 15-1 and 21-10; see generally Pacific's Opening Brief at 142-47.)

10. Audit of Costs related to applying for InterLATA service (Audit Report at __; Pacific's Opening Brief at 174.)

(END OF APPENDIX E)

¹ Index numbers cross-reference to the chart entitled "Joint Exhibit of Overland Consulting, Inc., ORA, TURN and Pacific Bell Showing Impact of Audit Corrections on Pacific Bell's Reported IEMR Results for 1997-1999," Appendix A hereto. ² Undisputed affiliate transactions issues also appear in Pacific's Exh. 2B:362A. ³ To assist in identifying the issues, for each item, we identify where in the Audit Report it appears, and where Pacific discusses the matter in its post-hearing opening brief for Phase 2B. ⁴ In completing this audit task, Overland shall have access to all available material related to Ernst & Young's audit(s) of Pacific's affiliate transactions.


Summary of Adopted Adjustments to Net Operating Income and Rate Base Pacific Bell Intrastate Regulated Operations Phase 2B 1997
Joint Exhibit Index	Line Number	Adopted Adjustments to Net Operating Income	Pacific Bell Total Co.	Non-Reg (Below the Line )	Interstate Separations	Intrastate Reg Before Tax	Income Tax	Intrastate Regulated After Tax
		Phase 2B Net Operating Income

39	1.	SBC Ops FAS 106 Merger Conforming Expense	-			-	-	-
40	2.	AMDOC Awards SBC Operations	-			-	-	-
41	3.	Excess Executive Compensation SBC Operations	-			-	-	-
42	4.	SBC Ops Sec. Alloc of Parent Mgt Fees	-			-	-	-
43	5.	SBC Ops Call Ctr Depreciation, Merger Implementation Exp.	-			-	-	-
44	6.	SBC Svcs "Excess" Executive Comp Expense	-			-	-	-
45	7.	SBC Svcs, CFL, TRI Sec. Alloc. of Parent Mgt Fees	-			-	-	-
46	8.	Parent "Excess" Executive Compensation Expense	3,146,751	17,745	643,633	2,485,373	(1,012,690)	1,472,683
47	9.	Parent Political and Legislative Influence Expense	18,219,042	-	3,747,639	14,471,403	(5,896,518)	8,574,885
48	10.	Parent Legal Expense	-			-	-	-
49	11.	Parent Public Relations & Corporate Sponsorship Expense	3,667,301	94,355	702,983	2,869,963	(1,169,395)	1,700,568
50	12.	Parent Corporate Development Expense	-			-	-	-
51	13.	Parent Strategic Planning Expense	3,630,668	70,541	732,315	2,827,812	(1,152,220)	1,675,592
52	14.	Parent Contributions, Memberships, Foundation Expense	342,104	-	70,370	271,734	(110,721)	161,013
53	15.	Parent Out of Period Expense	(7,415,911)	(100,845)	(1,504,702)	(5,810,364)	2,367,491	(3,442,873)
54	16.	Parent Merger Conforming Expense	-			-	-	-
55	17.	Parent Impact of Adjustments on Billings to PBD	1,301,134	-	-	1,301,134	(530,160)	770,974
56	18.	MSI USA "Excess" Executive Compensation Billed Directly	-			-	-	-
57	19.	Parent PB Employee Transfer Fees Billed Back to Pac Bell	1,350,777	19,407	273,862	1,057,508	(430,892)	626,616
59	20.	Nevada Bell Net Directory Revenue	-			-	-	-
	21.	TRI Expenses	-			-	-	-
60b	22.	Depreciation Expense Timing Adjustment	-			-	-	-
61	23.	Advertising Direct Assignment and Common Allocations	-			-	-	-
62	24.	Customer Service Non-Productive Salary Allocations	(2,285,929)		(532,304)	(1,753,625)	714,532	(1,039,093)
63	25.	Affiliate Marketing Services Revenue	-			-	-	-
64	26.	Non-regulated Tracking Code Direct Assignment Errors	15,926		3,441	12,485	(5,087)	7,398
65	27.	National-Local Strategy Implementation	-			-	-	-
66	28.	1997 Corporate Sponsorship Costs	2,083,333		371,135	1,712,198	(697,652)	1,014,546
67	29.	Customer Premise Equipment Costs	-			-	-	-
1	30.	Unsupported Contingent Liabilities - Revenues	40,463,493	-	-	40,463,493	(16,487,255)	23,976,238


Summary of Adopted Audit Adjustments to Net Operating Income and Rate Base Pacific Bell Intrastate Regulated Operations Phase 2B 1998
Joint Exhibit Index No.	Line Number	Adopted Adjustments to Net Operating Income	Pacific Bell Total Co.	Non-Reg (Below the Line )	Interstate Separations	Intrastate Reg Before Tax	Income Tax	Intrastate Regulated After Tax
		Phase 2B Net Operating Income
39	1.	SBC Ops FAS 106 Merger Conforming Expense	-			-	-	-
40	2.	AMDOC Awards SBC Operations	-			-	-	-
41	3.	Excess Executive Compensation SBC Operations	1,088,244	53,543	222,924	811,777	(330,767)	481,010
42	4.	SBC Ops Sec. Alloc of Parent Mgt Fees	660,252	32,486	135,251	492,515	(200,680)	291,835
43	5.	SBC Ops Call Ctr Depreciation, Merger Implementation Exp.	784,511	269,817	114,679	400,015	(162,990)	237,025
44	6.	SBC Svcs "Excess" Executive Comp Expense	364,804	12,115	77,783	274,906	(112,013)	162,893
45	7.	SBC Svcs, CFL, TRI Sec. Alloc. of Parent Mgt Fees	596,298	25,231	122,508	448,559	(182,770)	265,789
46	8.	Parent "Excess" Executive Compensation Expense	15,059,186	362,378	3,162,128	11,534,680	(4,699,921)	6,834,759
47	9.	Parent Political and Legislative Influence Expense	21,532,160	-	4,639,061	16,893,099	(6,883,262)	10,009,837
48	10.	Parent Legal Expense	981,611	37,545	203,397	740,669	(301,793)	438,876
49	11.	Parent Public Relations & Corporate Sponsorship Expense	19,455,535	833,439	4,136,395	14,485,701	(5,902,344)	8,583,357
50	12.	Parent Corporate Development Expense	6,859,066	257,693	1,422,273	5,179,100	(2,110,276)	3,068,824
51	13.	Parent Strategic Planning Expense	1,178,332	35,205	245,228	897,899	(365,858)	532,041
52	14.	Parent Contributions, Memberships, Foundation Expense	1,439,107	24,501	304,774	1,109,832	(452,212)	657,620
53	15.	Parent Out of Period Expense	7,415,911	187,881	1,556,204	5,671,826	(2,311,042)	3,360,784
54	16.	Parent Merger Conforming Expense	-			-	-	-
55	17.	Parent Impact of Adjustments on Billings to PBD	6,607,026	-	-	6,607,026	(2,692,099)	3,914,927
56	18.	MSI USA "Excess" Executive Compensation Billed Directly	-			-	-	-
57	19.	Parent PB Employee Transfer Fees Billed Back to Pac Bell	-			-	-	-
59	20.	Nevada Bell Net Directory Revenue	-			-	-	-
-	21.	TRI Expenses	24,627,790		5,849,100	18,778,690	(7,651,565)	11,127,125
60b	22.	Depreciation Expense Timing Adjustment	-			-	-	-
61	23.	Advertising Direct Assignment and Common Allocations	6,519,231	2,301,560	959,014	3,258,657	(1,327,772)	1,930,885
62	24.	Customer Service Non-Productive Salary Allocations	(7,450,229)		(1,769,429)	(5,680,800)	2,314,699	(3,366,101)
63	25.	Affiliate Marketing Services Revenue	6,825,006		1,365,001	5,460,005	(2,224,734)	3,235,271
64	26.	Non-regulated Tracking Code Direct Assignment Errors	9,534,336		2,361,549	7,172,787	(2,922,624)	4,250,163

65	27.	National-Local Strategy Implementation	-			-	-	-
66	28.	1997 Corporate Sponsorship Costs	-			-	-	-
67	29.	Customer Premise Equipment Costs	22,721,475		5,680,369	17,041,106	(6,943,569)	10,097,537
1	30.	Unsupported Contingent Liabilities - Revenues	-			-	-	-
2	31.	Bellcore Dividends	-			-	-	-
3	32.	Uncollectible Revenues - RCRMS (PacBell reports flows thru)	-			-	-	-
Summary of Adopted Audit Adjustments to Net Operating Income and Rate Base Pacific Bell Intrastate Regulated Operations Phase 2B 1998
Joint Exhibit Index No.	Line Number	Adopted Adjustments to Net Operating Income	Pacific Bell Total Co.	Non-Reg (Below the Line )	Interstate Separations	Intrastate Reg Before Tax	Income Tax	Intrastate Regulated After Tax
4	33.	Gain on Sale of Bellcore	-			-	-	-
5	34.	Local Number Portability Costs	61,870,980	1,737,102	13,040,878	47,093,000	(19,188,514)	27,904,486
6	35.	Local Competition Costs	8,447,002	483,056		7,963,946	(3,244,989)	4,718,957
7	36.	Merger Savings	4,200,000	-	-	4,200,000	(1,711,332)	2,488,668

8	37.	Advanced Communications Network	10,034,385	573,833	2,230,593	7,229,959	(2,945,919)	4,284,040
9	38.	Software Buy-Out Agreement	-			-	-	-
10	39.	Unsupported Contingent Liabilities - Operating Expense	1,920,000	6,034		1,913,966	(779,865)	1,134,101
11	40.	Incentive Pay Accrual	(57,515,730)	(4,780,351)	(11,995,480)	(40,739,899)	16,599,879	(24,140,020)
12	41.	ISP-Bound Traffic Separations	-			-	-	-
13	42.	Uncollectible Settlements - RCRMS	16,800,000		3,619,560	13,180,440	(5,370,502)	7,809,938
16	43.	SFAS 112	-	-	-	-	-	-
17	44.	Intrabuilding Cable Amortization	28,333,938	300,340	-	28,033,598	(11,422,570)	16,611,028
18	45.	SAVR Delayed Retirements	7,232,407	83,173	-	7,149,234	(2,913,027)	4,236,207
19	46.	SAVR Reverse Retirements	1,050,412	12,080	-	1,038,332	(423,079)	615,253
20	47.	Equal Access IEMR Ratemaking Adjustment	(10,931,000)			(10,931,000)	4,453,945	(6,477,055)
22	48.	Ameritech Income Tax Misclass	-			-		-
23	49.	Income Tax Normalization - Phase 2B Issues	85,117,000	-	-	85,117,000		85,117,000
24	50.	Excess Deferred Income Tax	38,408,000		8,783,910	29,624,090		29,624,090
25	51.	Sales and Use Tax Accrual	999,996		228,699	771,297	(314,273)	457,024
26	52.	Employment Tax Error	-			-	-	-
68	53.	PIU Accrual	-			-	-	-
69	54.	USOAR Turnaround Accrual	-			-	-	-
70b	55.	LNP Depreciation	2,678,000			2,678,000	(1,091,178)	1,586,822
71b	56.	AFUDC	656,000			656,000	(267,294)	388,706
	57.	Total Phase 2B Net Operating Income	346,101,041	2,848,661	46,696,369	296,556,011	(74,082,308)	222,473,703
		Phase 2B Rate Base
29	58.	SFAS 112 Liability						(236,462,847)
30	59.	Vacation Liability						(51,359,429)
31	60.	SFAS 106 Accrued Liability						(5,998,000)
32	61.	Accrued Contingent Liability						(20,106,000)
60a	62.	Depreciation Expense Timing Adjustment						-
27	63.	Cash Working Capital						(530,735,000)
28	64.	Prepaid Directory Expense						83,904,000
35	65.	Restructure Reserve						(29,024,711)
36	66.	Accumulated Reserve for Depreciation						36,308,845
37	67.	Accumulated Deferred Income Tax						(55,160,036)
38	68.	Excess Deferred Income Tax						12,800,000
70a	69.	LNP Plant						(32,794,000)
71a	70.	AFUDC						(8,370,000)
72	71.	PBOP Pre-Funding Plant Adj.						13,312,000
	72.	Total Phase 2B Rate Base						(823,685,178)
Summary of Adopted Adjustments to Net Operating Income and Rate Base Pacific Bell Intrastate Regulated Operations Phase 2B 1999
Joint Exhibit Index No.	Line Number	Adopted Adjustments to Net Operating Income	Pacific Bell Total Co.	Non-Reg (Below the Line )	Interstate Separations	Intrastate Reg Before Tax	Income Tax	Intrastate Regulated After Tax
		Phase 2B Net Operating Income

39	1.	SBC Ops FAS 106 Merger Conforming Expense	4,062,029	502,081	764,182	2,795,766	(1,139,163)	1,656,603
40	2.	AMDOC Awards SBC Operations	615,307	68,515	120,399	426,393	(173,738)	252,655
41	3.	Excess Executive Compensation SBC Operations	1,532,717	189,449	288,347	1,054,921	(429,838)	625,083
42	4.	SBC Ops Sec. Alloc of Parent Mgt Fees	663,868	82,057	124,892	456,919	(186,176)	270,743
43	5.	SBC Ops Call Ctr Depreciation, Merger Implementation Exp.	-	-	-	-	-	-
44	6.	SBC Svcs "Excess" Executive Comp Expense	310,190	20,703	62,363	227,124	(92,544)	134,580
45	7.	SBC Svcs, CFL, TRI Sec. Alloc. of Parent Mgt Fees	497,121	31,518	100,409	365,194	(148,802)	216,392
46	8.	Parent "Excess" Executive Compensation Expense	15,652,558	411,181	3,276,084	11,965,293	(4,875,378)	7,089,915
47	9.	Parent Political and Legislative Influence Expense	8,996,671	-	1,931,234	7,065,437	(2,878,883)	4,186,554
48	10.	Parent Legal Expense	483,922	28,214	97,823	357,885	(145,824)	212,061
49	11.	Parent Public Relations & Corporate Sponsorship Expense	20,210,683	714,200	4,614,691	14,881,792	(6,063,735)	8,818,057
50	12.	Parent Corporate Development Expense	8,007,868	473,146	1,617,643	5,917,079	(2,410,973)	3,506,106
51	13.	Parent Strategic Planning Expense	902,785	20,982	190,182	691,621	(281,808)	409,813
52	14.	Parent Contributions, Memberships, Foundation Expense	(6,557,997)	34,601	(1,415,174)	(5,177,424)	2,109,593	(3,067,831)
53	15.	Parent Out of Period Expense	-	-	-	-	-	-
54	16.	Parent Merger Conforming Expense	1,029,118	52,190	209,802	767,126	(312,573)	454,553
55	17.	Parent Impact of Adjustments on Billings to PBD	7,516,450	-	-	7,516,450	(3,062,653)	4,453,797
56	18.	MSI USA "Excess" Executive Compensation Billed Directly	4,558,803	251,564	928,959	3,378,280	(1,376,514)	2,001,766
57	19.	Parent PB Employee Transfer Fees Billed Back to Pac Bell	-	-	-	-	-	-
59	20.	Nevada Bell Net Directory Revenue	(16,179,000)	-	-	(16,179,000)	4,926,000	(11,253,000)
	21.	TRI Expenses	19,793,114	-	4,223,534	15,569,580	(6,343,981)	9,225,599
60b	22.	Depreciation Expense Timing Adjustment	3,713,626	-	796,543	2,917,083	(1,188,595)	1,728,488
61	23.	Advertising Direct Assignment and Common Allocations	5,131,057	1,175,687	997,616	2,957,754	(1,205,166)	1,752,588
62	24.	Customer Service Non-Productive Salary Allocations	(10,327,231)	-	(2,203,666)	(8,123,565)	3,310,028	(4,813,537)
63	25.	Affiliate Marketing Services Revenue	28,879,501	-	5,775,900	23,103,601	(9,413,793)	13,689,808
64	26.	Non-regulated Tracking Code Direct Assignment Errors	7,284,797	-	1,820,400	5,464,397	(2,226,523)	3,237,874
65	27.	National-Local Strategy Implementation	8,575,331	634,181	1,704,655	6,236,495	(2,541,122)	3,695,373
66	28.	1997 Corporate Sponsorship Costs	-	-	-	-	-	-
67	29.	Customer Premise Equipment Costs	7,803,311	-	1,950,828	5,852,483	(2,384,653)	3,467,830
1	30.	Unsupported Contingent Liabilities - Revenues	-	-	-	-	-	-
2	31.	Bellcore Dividends	-	-	-	-	-	-
3	32.	Uncollectible Revenues - RCRMS (PacBell reports flows thru)	-	-	-	-	-	-
4	33.	Gain on Sale of Bellcore	-	-	-	-	-	-
5	34.	Local Number Portability Costs	38,861,608	1,215,608	-	37,646,000	(15,339,239)	22,306,761
6	35.	Local Competition Costs	-	-	-	-	-	-
7	36.	Merger Savings	4,200,000	-	-	4,200,000	(1,711,332)	2,488,668
8	37.	Advanced Communications Network	5,363,702	465,820	1,140,353	3,757,529	(1,531,043)	2,226,486
Summary of Adopted Adjustments to Net Operating Income and Rate Base Pacific Bell Intrastate Regulated Operations Phase 2B 1999
Joint Exhibit Index No.	Line Number	Adopted Adjustments to Net Operating Income	Pacific Bell Total Co.	Non-Reg (Below the Line )	Interstate Separations	Intrastate Reg Before Tax	Income Tax	Intrastate Regulated After Tax
9	38.	Software Buy-Out Agreement	55,651,506	348,922	10,837,094	44,465,490	(18,117,909)	26,347,581
10	39.	Unsupported Contingent Liabilities - Operating Expense	13,968,240	2,203,104		11,765,136	(4,793,822)	6,971,314
11	40.	Incentive Pay Accrual	49,203,329	4,026,500	10,115,741	35,061,088	(14,285,991)	20,775,097
12	41.	ISP-Bound Traffic Separations	-	-	-	-	-	-
13	42.	Uncollectible Settlements - RCRMS	1,100,000	-	236,126	863,874	(351,994)	511,880
16	43.	SFAS 112	-	-	-	-	-	-
17	44.	Intrabuilding Cable Amortization	-	-	-	-	-	-
18	45.	SAVR Delayed Retirements	-	-	-	-	-	-
19	46.	SAVR Reverse Retirements	3,996,587	39,966	-	3,956,621	(1,612,165)	2,344,456
20	47.	Equal Access IEMR Ratemaking Adjustment	-	-	-	-	-	-
22	48.	Ameritech Income Tax Misclass	8,001,866	-	-	8,001,866	-	8,001,866
23	49.	Income Tax Normalization - Phase 2B Issues	(64,903,000)	-	-	(64,903,000)	-	(64,903,000)
24	50.	Excess Deferred Income Tax	38,408,000	-	8,736,668	29,671,332	-	29,671,332
25	51.	Sales and Use Tax Accrual	(5,520,320)	-	(3,114,901)	(2,405,419)	980,112	(1,425,307)
26	52.	Employment Tax Error	9,655,828	163,183	2,159,292	7,333,353	(2,988,048)	4,345,305
68	53.	PIU Accrual	-	-	-	-	-	-
69	54.	USOAR Turnaround Accrual	-	-	-	-	-	-
70b	55.	LNP Depreciation	4,246,999	-	-	4,246,999	(1,730,482)	2,516,517
71b	56.	AFUDC	856,000	-	-	856,000	(348,786)	507,214

	57.	Total Phase 2B Net Operating Income	286,246,943	13,153,372	58,088,019	215,005,552	(100,367,513)	114,638,040

		Phase 2B Rate Base

29	58.	SFAS 112 Liability						(255,430,427)
30	59.	Vacation Liability						(45,735,145)
31	60.	SFAS 106 Accrued Liability						5,352,000
32	61.	Accrued Contingent Liability						(7,800,000)
60a	62.	Depreciation Expense Timing Adjustment					(2,917,083)
27	63.	Cash Working Capital						(378,865,000)
28	64.	Prepaid Directory Expense						71,382,000
35	65.	Restructure Reserve						(28,975,159)
36	66.	Accumulated Reserve for Depreciation						46,060,404
37	67.	Accumulated Deferred Income Tax						(43,318,848)
38	68.	Excess Deferred Income Tax						38,400,000
70a	69.	LNP Plant						(43,507,000)
71a	70.	AFUDC						(12,964,000)
72	71.	PBOP Pre-Funding Plant Adj.						13,312,000

	72.	Total Phase 2B Rate Base						(639,172,092)


R.01-09-001 / I.01-09-002 Joint Exhibit of Overland Consulting, Inc., ORA, TURN and Pacific Bell Showing Impact of Audit Corrections on Pacific Bell's Reported IEMR Results for 1997 - 1999
Index #	Report Chapter	Adjustment Description (A) (B)	Status of Dispute	Party	NOTES	1997 Final Adjustments	1997 Individual Adjustment Impact on Rate of Return	1998 Final Adjustments	1998 Individual Adjustment Impact on Rate of Return	1999 Final Adjustments	1999 Individual Adjustment Impact on Rate of Return	Total Audit Period Final Adjustment Amounts
		Income Statement Adjustments

1	5-13	Unsupported Contingent Liabilities - Revenues (IS)	SUBS	Overland		40,463,493	0.40%	0	0.00%	0	0.00%	40,463,493
				ORA	(4)	40,463,493	0.40%	0	0.00%	0	0.00%	40,463,493
				TURN	(5)	40,463,493	0.40%	0	0.00%	0	0.00%	40,463,493
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

2	5-14	Bellcore Dividends (IS)	NONE	Overland		3,883,507	0.04%	0	0.00%	0	0.00%	3,883,507
				ORA	(2)	3,883,507	0.04%	0	0.00%	0	0.00%	3,883,507
				TURN	(6)
				Pacific		3,883,507	0.04%	0	0.00%	0	0.00%	3,883,507

3	5-15	Uncollectible Revenues - RCRMS (PacBell flows through) (IS)	SUBS	Overland		53,533,000	0.53%	0	0.00%	0	0.00%	53,533,000
				ORA	(4)	53,533,000	0.53%	0	0.00%	0	0.00%	53,533,000
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

4	5-19	Gain on Sale of Bellcore (IS)	NONE	Overland		9,122,587	0.09%	0	0.00%	0	0.00%	9,122,587
				ORA	(2)	9,122,587	0.09%	0	0.00%	0	0.00%	9,122,587
				TURN	(6)
				Pacific	(8)	9,122,587		0	0.00%	0	0.00%	9,122,587

5	6-15	Local Number Portability Costs (IS)	BOTH	Overland		51,313,964	0.51%	27,904,486	0.27%	22,306,761	0.22%	101,525,211
	S6-1			ORA	(4)	51,313,964	0.51%	27,904,486	0.27%	22,306,761	0.22%	101,525,211
				TURN	(5)	51,313,964	0.51%	27,904,486	0.27%	22,306,761	0.22%	101,525,211
				Pacific		0	0.00%	15,645,112	0.15%	22,306,761	0.22%	37,951,873

6	6-19	Local Competition Costs (IS)	SUBS	Overland		40,974,049	0.41%	7,963,946	0.08%	0	0.00%	48,937,995
				ORA	(4)	40,974,049	0.41%	7,963,946	0.08%	0	0.00%	48,937,995
				TURN	(5)	40,974,049	0.41%	7,963,946	0.08%	0	0.00%	48,937,995
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

7	6-22	Merger Savings Allocation (IS)	AMT	Overland		5,327,527	0.05%	23,321,782	0.23%	(7,704,205)	-0.08%	20,945,104
				ORA	(3)	0	0.00%	2,500,000	0.02%	2,470,000	0.02%	4,970,000
				TURN	(6)
				Pacific		0	0.00%	2,495,834	0.02%	2,470,279	0.02%	4,966,113

8	6-27	Advanced Communications Network (IS)	NONE	Overland		17,846,219	0.18%	4,284,040	0.04%	2,226,486	0.02%	24,356,745
				ORA	(4)	17,846,219	0.18%	4,284,040	0.04%	2,226,486	0.02%	24,356,745
				TURN	(6)
				Pacific	(8)	17,846,219		4,284,040		2,226,486		24,356,745

9	6-31	Software Buy-Out Agreement (IS)	SUBS	Overland		0	0.00%	0	0.00%	44,465,490	0.45%	44,465,490
				ORA	(2)	0	0.00%	0	0.00%	44,465,490	0.45%	44,465,490
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

10	6-32	Unsupported Contingent Liabilities - Operating Expense (IS)	SUBS	Overland		89,166,316	0.89%	1,913,966	0.02%	11,765,136	0.12%	102,845,418
				ORA	(4)	89,166,316	0.89%	1,913,966	0.02%	11,765,136	0.12%	102,845,418
				TURN	(5)	89,166,316	0.89%	1,913,966	0.02%	11,765,136	0.12%	102,845,418
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

11	6-34	Incentive Pay Accrual (IS)	SUBS	Overland		34,353,665	0.34%	(40,739,899)	-0.40%	35,061,088	0.35%	28,674,854
				ORA	(2)	34,353,665	0.34%	(40,739,899)	-0.40%	35,061,088	0.35%	28,674,854
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

12	6-37	ISP-Bound Traffic Separations (IS)	NONE	Overland		(11,329,359)	-0.11%	0	0.00%	0	0.00%	(11,329,359)
				ORA	(2)	(11,329,359)	-0.11%	0	0.00%	0	0.00%	(11,329,359)
				TURN	(6)
				Pacific		(11,329,359)	-0.11%	0	0.00%	0	0.00%	(11,329,359)

13	6-36	Uncollectible Settlements - RCRMS (IS)	SUBS	Overland		28,038,790	0.28%	13,180,440	0.13%	863,874	0.01%	42,083,104
				ORA	(4)	28,038,790	0.28%	13,180,440	0.13%	863,874	0.01%	42,083,104
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

14	7-9	Pension Expense (IS)	SUBS	Overland		105,280,092	1.05%	108,774,347	1.07%	110,496,463	1.11%	324,550,902
	S7-13			ORA	(4)	105,280,092	1.05%	108,774,347	1.07%	110,496,463	1.11%	324,550,902
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

15a	7-13	SFAS 106 (IS)	SUBS	Overland		29,706,000	0.30%	395,443,000	3.89%	103,470,000	1.04%	528,619,000
				ORA	(4)	29,706,000	0.30%	395,443,000	3.89%	103,470,000	1.04%	528,619,000
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

15b	7-13	SFAS 106 - Pension Trust Withdrawal (IS)	SUBS	Overland		0	0.00%	0	0.00%	68,749,000	0.69%	68,749,000
	S7-6			ORA	(4)	0	0.00%	0	0.00%	68,749,000	0.69%	68,749,000
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

16	7-33	SFAS 112 (IS)	SUBS	Overland		9,594,151	0.10%	0	0.00%	0	0.00%	9,594,151
				ORA	(2)	9,594,151	0.10%	0	0.00%	0	0.00%	9,594,151
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0
17	8-6	Intrabuilding Cable Amortization (IS)	SUBS	Overland		19,473,832	0.19%	16,611,028	0.16%	0	0.00%	36,084,860
				ORA	(4)	19,473,832	0.19%	16,611,028	0.16%	0	0.00%	36,084,860
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

18	8-7	SAVR Delayed Retirements (IS)	SUBS	Overland		5,906,945	0.06%	4,236,207	0.04%	0	0.00%	10,143,152
				ORA	(2)	5,906,945	0.06%	4,236,207	0.04%	0	0.00%	10,143,152
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

19	8-7	SAVR Reverse Retirements (IS)	SUBS	Overland		271,567	0.00%	615,253	0.01%	2,344,456	0.02%	3,231,276
				ORA	(2)	271,567	0.00%	615,253	0.01%	2,344,456	0.02%	3,231,276
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

20	8-8	Equal Access IEMR Ratemaking Adjustment (IS)	NONE	Overland		0	0.00%	(6,477,055)	-0.06%	0	0.00%	(6,477,055)
	S8-1			ORA	(2)	0	0.00%	(6,477,055)	-0.06%	0	0.00%	(6,477,055)
				TURN	(6)
				Pacific		0	0.00%	(6,477,055)	-0.06%	0	0.00%	(6,477,055)

21	8-12	Reserve Deficiency Amortization (IS)	SUBS	Overland	(1)	0	0.00%	0	0.00%	362,466,228	3.64%	362,466,228
				ORA	(4)	0	0.00%	0	0.00%	362,466,228	3.64%	362,466,228
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

22	9-22	Ameritech Income Tax Misclass (IS)	SUBS	Overland		0	0.00%	0	0.00%	8,001,866	0.08%	8,001,866
				ORA	(2)	0	0.00%	0	0.00%	8,001,866	0.08%	8,001,866
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0
23	9-11	Income Tax Normalization (IS)	SUBS	Overland		(92,198,238)	-0.92%	(5,569,856)	-0.05%	61,264,694	0.61%	(36,503,400)
	S9-3			ORA	(4)	(92,198,238)	-0.92%	(5,569,856)	-0.05%	61,264,694	0.61%	(36,503,400)
	S9-5			TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

24	9-21	Excess Deferred Income Tax (IS)	SUBS	Overland	(1)	0	0.00%	29,624,000	0.29%	29,671,000	0.30%	59,295,000
	S9-6			ORA	(4)	0	0.00%	29,624,000	0.29%	29,671,000	0.30%	59,295,000
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

25	9-24	Sales and Use Tax Accrual (IS)	SUBS	Overland		777,410	0.01%	771,297	0.01%	(2,405,419)	-0.02%	(856,712)
				ORA	(2)	777,410	0.01%	771,297	0.01%	(2,405,419)	-0.02%	(856,712)
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

26	9-24	Employment Tax Error (IS)	SUBS	Overland		0	0.00%	0	0.00%	7,333,353	0.07%	7,333,353
				ORA	(2)	0	0.00%	0	0.00%	7,333,353	0.07%	7,333,353
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

39	15-18	SBC Ops FAS 106 Merger Conforming Expense (IS)	NONE	Overland		0	0.00%	0	0.00%	1,656,603	0.02%	1,656,603
				ORA	(2)	0	0.00%	0	0.00%	1,656,603	0.02%	1,656,603
				TURN	(6)
				Pacific	(8)	0	0.00%	0	0.00%	1,656,603		1,656,603

40	15-19	AMDOCS Awards SBC Operations (IS)	SUBS	Overland		0	0.00%	0	0.00%	252,655	0.00%	252,655
				ORA	(4)	0	0.00%	0	0.00%	252,655	0.00%	252,655
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

41	15-20	Excess Executive Compensation SBC Operations (IS)	SUBS	Overland		0	0.00%	465,193	0.00%	610,568	0.01%	1,075,761
				ORA	(4)	0	0.00%	465,193	0.00%	610,568	0.01%	1,075,761
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

42	15-21	SBC Ops Sec. Alloc of Parent Mgt Fees (IS)	NONE	Overland		0	0.00%	291,835	0.00%	270,743	0.00%	562,578
				ORA	(2)	0	0.00%	291,835	0.00%	270,743	0.00%	562,578
				TURN	(6)
				Pacific	(8)	0	0.00%	291,835		270,743		562,578

43	15-22	SBC Ops Call Ctr Depreciation, Merger Implmntatn Exp (IS)	NONE	Overland		0	0.00%	237,025	0.00%	0	0.00%	237,025
				ORA	(2)	0	0.00%	237,025	0.00%	0	0.00%	237,025
				TURN	(6)
				Pacific	(8)	0	0.00%	237,025		0	0.00%	237,025

44	16-18	SBC Svcs "Excess" Executive Comp Exp (IS)	SUBS	Overland		0	0.00%	109,093	0.00%	107,020	0.00%	216,113
				ORA	(4)	0	0.00%	109,093	0.00%	107,020	0.00%	216,113
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

45	16-19	SBC Svcs, CFL, TRI Sec.Alloc. of Parent Mgt Fees (IS)	NONE	Overland		0	0.00%	265,789	0.00%	216,392	0.00%	482,181
				ORA	(2)	0	0.00%	265,789	0.00%	216,392	0.00%	482,181
				TURN	(6)
				Pacific	(8)	0	0.00%	265,789		216,392		482,181

46	14-9	Parent "Excess" Executive Compensation Expense (IS)	SUBS	Overland		1,451,564	0.01%	6,534,667	0.06%	6,845,540	0.07%	14,831,771
				ORA	(4)	1,451,564	0.01%	6,534,667	0.06%	6,845,540	0.07%	14,831,771
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

47	14-23	Parent Political and Legislative Influence Expense (IS)	NONE	Overland		8,574,885	0.09%	10,009,837	0.10%	4,186,554	0.04%	22,771,276
				ORA	(2)	8,574,885	0.09%	10,009,837	0.10%	4,186,554	0.04%	22,771,276
				TURN	(6)
				Pacific	(8)	8,574,885		10,009,837		4,186,554		22,771,276

48	14-26	Parent Legal Expense (IS)	SUBS	Overland		0	0.00%	438,876	0.00%	212,061	0.00%	650,937
				ORA	(4)	0	0.00%	438,876	0.00%	212,061	0.00%	650,937
				TURN	(5)	0	0.00%	438,876	0.00%	212,061	0.00%	650,937
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

49	14-34	Parent Public Relations & Corporate Sponsorship Exp (IS)	SUBS	Overland		1,700,568	0.02%	8,583,357	0.08%	8,818,057	0.09%	19,101,982
				ORA	(4)	1,700,568	0.02%	8,583,357	0.08%	8,818,057	0.09%	19,101,982
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

50	14-33	Parent Corporate Development Expense (IS)	SUBS	Overland		0	0.00%	3,068,824	0.03%	3,506,106	0.04%	6,574,930
				ORA	(4)	0	0.00%	3,068,824	0.03%	3,506,106	0.04%	6,574,930
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

51	14-35	Parent Strategic Planning Expense (IS)	SUBS	Overland		1,675,592	0.02%	532,041	0.01%	409,813	0.00%	2,617,446
				ORA	(4)	1,675,592	0.02%	532,041	0.01%	409,813	0.00%	2,617,446
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

52	14-38	Parent Contributions, Memberships, Foundation Exp (IS)	NONE	Overland		161,013	0.00%	657,620	0.01%	(3,067,831)	-0.03%	(2,249,198)
				ORA	(2)	161,013	0.00%	657,620	0.01%	(3,067,831)	-0.03%	(2,249,198)
				TURN	(6)
				Pacific	(8)	161,013		657,620		(3,067,831)		(2,249,198)

53	14-39	Parent Out of Period Expense (IS)	SUBS	Overland		(3,442,873)	-0.03%	3,360,784	0.03%	0	0.00%	(82,089)
				ORA	(2)	(3,442,873)	-0.03%	3,360,784	0.03%	0	0.00%	(82,089)
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

54	14-40	Parent Merger Conforming Expense (IS)	NONE	Overland		0	0.00%	0	0.00%	454,553	0.00%	454,553
				ORA	(2)	0	0.00%	0	0.00%	454,553	0.00%	454,553
				TURN	(6)
				Pacific	(8)	0	0.00%	0	0.00%	454,553		454,553

55	14-41	Parent Impact of Adjustmts on Billings to PBD (IS)		Overland	(9)	770,974	0.01%	3,914,927	0.04%	4,453,797	0.04%	9,139,698
				ORA	(2),(4)	770,974	0.01%	3,914,927	0.04%	4,453,797	0.04%	9,139,698

55i		PBD Parent Impact Legal Expense (IS)		TURN	(5)	0	0.00%	24,752	0.00%	8,965	0.00%	33,717

55a		PBD Parent Impact Contributions Memberships (IS)	NONE	Pacific	(8)	75,500		259,236		195,782		530,518
55b		PBD Parent Impact Corporate Acquisitions (IS)	SUBS	Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0
55c		PBD Parent Impact Corporate Sponsorships (IS)	SUBS	Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0
55d		PBD Parent Impact Excess Executive Compensation (IS)	SUBS	Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0
55e		PBD Parent Impact Lobbying (IS)	NONE	Pacific	(8)	389,744		729,081		881,323		2,000,148
55f		PBD Parent Impact Special Executive Payments (IS)	SUBS	Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0
55g		PBD Parent Impact Public Relations Expense (IS)	SUBS	Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0
55h		PBD Parent Impact Strategic Planning Expense (IS)	SUBS	Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0
55i		PBD Parent Impact Legal Expense (IS)	SUBS	Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0
55j		PBD Parent Impact Management Fee (IS)	NONE	Pacific	(8)	0	0.00%	1,145,479		1,248,344		2,393,823
55k		PBD Parent Impact Employee Transfer Fees (IS)	NONE	Pacific	(8)	58,754		0	0.00%	0	0.00%	58,754


56	14-41	MSI USA "Excess" Executive Comp Billed Directly (IS)	SUBS	Overland		0	0.00%	0	0.00%	1,833,222	0.02%	1,833,222
				ORA	(4)	0	0.00%	0	0.00%	1,833,222	0.02%	1,833,222
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

57	17-18	Parent PB Employee Trsfr Fees Billed Back to PB (IS)	NONE	Overland		626,616	0.01%	0	0.00%	0	0.00%	626,616
				ORA	(2)	626,616	0.01%	0	0.00%	0	0.00%	626,616
				TURN	(6)
				Pacific	(8)	626,616		0	0.00%	0	0.00%	626,616

58	17-18	Fees for Employees Transferred in 1999 (IS)	NONE	Overland	(11)	0	0.00%	0	0.00%	0	0.00%	0
				ORA	(4)	0	0.00%	0	0.00%	0	0.00%	0
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

59	18-2	Nevada Bell Net Directory Revenue (IS)	NONE	Overland		0	0.00%	0	0.00%	(11,253,000)	-0.11%	(11,253,000)
	18-7			ORA	(2)	0	0.00%	0	0.00%	(11,253,000)	-0.11%	(11,253,000)
				TURN	(6)
				Pacific		0	0.00%	0	0.00%	(11,253,000)	-0.11%	(11,253,000)

ORA	19	ASI - ADSL Development Cost Treatment (IS)	SUBS	Overland		0	0.00%	0	0.00%	0	0.00%	0
				ORA	(3)	2,439,732	0.02%	5,577,046	0.05%	86,291,540	0.87%	94,308,318
				TURN	(5)	2,439,732	0.02%	5,577,046	0.05%	86,291,540	0.87%	94,308,318
				Pacific	(10)	0	0.00%	0	0.00%	0	0.00%	0

60b	20-20	Depreciation Expense Timing Adjustment (IS)	SUBS	Overland	(1)	0	0.00%	0	0.00%	2,917,083	0.03%	2,917,083
				ORA	(2)	0	0.00%	0	0.00%	2,917,083	0.03%	2,917,083
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

61	20-22	Advertising Direct Assignment and Common Allocations (IS)	SUBS	Overland		0	0.00%	1,930,885	0.02%	1,752,588	0.02%	3,683,473
				ORA	(2)	0	0.00%	1,930,885	0.02%	1,752,588	0.02%	3,683,473
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

62	20-31	Customer Service Non-Productive Salary Allocations (IS)	SUBS	Overland		(1,039,093)	-0.01%	(3,366,101)	-0.03%	(4,813,537)	-0.05%	(9,218,731)
				ORA	(2)	(1,039,093)	-0.01%	(3,366,101)	-0.03%	(4,813,537)	-0.05%	(9,218,731)
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

63	20-37	Affiliate Marketing Services Revenue (IS)	SUBS	Overland		0	0.00%	4,420,889	0.04%	17,936,810	0.18%	22,357,699
				ORA	(3)	0	0.00%	3,235,271	0.03%	13,689,808	0.14%	16,925,079
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

64	20-48	Non-regulated Tracking Code Direct Assignment Errors (IS)	NONE	Overland		7,398	0.00%	4,250,163	0.04%	3,237,874	0.03%	7,495,435
				ORA	(2)	7,398	0.00%	4,250,163	0.04%	3,237,874	0.03%	7,495,435
				TURN	(6)
				Pacific		7,398	0.00%	4,250,163	0.04%	3,237,874	0.03%	7,495,435

65	20-48	National-Local Strategy Implementation (IS)	SUBS	Overland		0	0.00%	0	0.00%	3,695,373	0.04%	3,695,373
				ORA	(2)	0	0.00%	0	0.00%	3,695,373	0.04%	3,695,373
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

66	20-25	1997 Corporate Sponsorship Costs (IS)	SUBS	Overland		1,014,546	0.01%	0	0.00%	0	0.00%	1,014,546
				ORA	(2)	1,014,546	0.01%	0	0.00%	0	0.00%	1,014,546
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

67	20-50	Customer Premise Equipment Costs (IS)	NONE	Overland		0	0.00%	10,097,537	0.10%	3,467,830	0.03%	13,565,367
				ORA	(2)	0	0.00%	10,097,537	0.10%	3,467,830	0.03%	13,565,367
				TURN	(6)
				Pacific		0	0.00%	10,097,537	0.10%	3,467,830	0.03%	13,565,367

68	S5-1	PIU Accrual (IS)	SUBS	Overland		(8,694,340)	-0.09%	0	0.00%	0	0.00%	(8,694,340)
				ORA	(2)	(8,694,340)	-0.09%	0	0.00%	0	0.00%	(8,694,340)
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

69	S5-2	USOAR Turnaround Accrual (IS)	SUBS	Overland		(13,701,303)	-0.14%	0	0.00%	0	0.00%	(13,701,303)
				ORA	(2)	(13,701,303)	-0.14%	0	0.00%	0	0.00%	(13,701,303)
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

70b	S6-1	LNP Depreciation (IS)	SUBS	Overland	(1)	683,085	0.01%	1,568,573	0.02%	2,491,352	0.03%	4,743,010
				ORA	(4)	683,085	0.01%	1,568,573	0.02%	2,491,352	0.03%	4,743,010
				TURN	(5)	683,085	0.01%	1,568,573	0.02%	2,491,352	0.03%	4,743,010
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

71b	10-17	AFUDC Depreciation Expense (IS)	SUBS	Overland	(1)	105,472	0.00%	388,706	0.00%	507,214	0.01%	1,001,392
	S10-1			ORA	(2)	105,472	0.00%	388,706	0.00%	507,214	0.01%	1,001,392
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0


		Rate Base Adjustments

27	11-5	Cash Working Capital (RB)	BOTH	Overland		(391,374,000)	0.26%	(513,422,000)	0.48%	(508,363,000)	0.52%	(1,413,159,000)
	S11-5			ORA	(3)	(511,550,000)	0.35%	(530,735,000)	0.50%	(378,865,000)	0.38%	(1,421,150,000)
				TURN	(5)	(511,550,000)	0.35%	(530,735,000)	0.50%	(378,865,000)	0.38%	(1,421,150,000)
				Pacific		(142,169,000)	0.09%	(91,320,000)	0.08%	(91,103,000)	0.09%	(324,592,000)

28	11-28	Prepaid Directory Expense (RB)	SUBS	Overland		93,805,000	-0.06%	83,904,000	-0.07%	71,382,000	-0.07%	249,091,000
				ORA	(2)	93,805,000	-0.06%	83,904,000	-0.07%	71,382,000	-0.07%	249,091,000
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

29	11-30	SFAS 112 Liability (RB)	SUBS	Overland		(213,204,405)	0.14%	(236,462,847)	0.22%	(255,430,427)	0.25%	(705,097,679)
				ORA	(2)	(213,204,405)	0.14%	(236,462,847)	0.22%	(255,430,427)	0.25%	(705,097,679)
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

30	11-31	Vacation Liability (RB)	SUBS	Overland		(51,867,976)	0.03%	(51,359,429)	0.05%	(45,735,145)	0.04%	(148,962,550)
				ORA	(2)	(51,867,976)	0.03%	(51,359,429)	0.05%	(45,735,145)	0.04%	(148,962,550)
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

31	11-31	SFAS 106 Accrued Liability (RB)	SUBS	Overland		124,000	0.00%	(5,998,000)	0.01%	5,352,000	-0.01%	(522,000)
				ORA	(2)	124,000	0.00%	(5,998,000)	0.01%	5,352,000	-0.01%	(522,000)
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

32	11-34	Accrued Contingent Liability (RB)	SUBS	Overland		(28,039,000)	0.02%	(20,106,000)	0.02%	(7,800,000)	0.01%	(55,945,000)
				ORA	(4)	(28,039,000)	0.02%	(20,106,000)	0.02%	(7,800,000)	0.01%	(55,945,000)
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

33	11-28	Prepaid Pension Costs (RB)	SUBS	Overland		52,640,046	-0.03%	159,667,092	-0.14%	269,302,092	-0.25%	481,609,230
	S11-6			ORA	(2)	52,640,046	-0.03%	159,667,092	-0.14%	269,302,092	-0.25%	481,609,230
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

34	10-22	SFAS 106 Plant (RB)	SUBS	Overland		4,892,000	0.00%	(7,621,000)	0.01%	(90,167,000)	0.09%	(92,896,000)
				ORA	(2)	4,892,000	0.00%	(7,621,000)	0.01%	(90,167,000)	0.09%	(92,896,000)
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

35	10-22	Restructure Reserve (RB)	AMT	Overland		(29,070,727)	0.02%	(29,024,711)	0.03%	(28,975,159)	0.03%	(87,070,597)
	S10-3			ORA	(2)	(29,070,727)	0.02%	(29,024,711)	0.03%	(28,975,159)	0.03%	(87,070,597)
				TURN	(6)
				Pacific		(4,374,000)	0.00%	(4,350,000)	0.00%	(4,350,000)	0.00%	(13,074,000)

36	10-23	Accumulated Reserve for Depreciation (RB)	SUBS	Overland	(1)	14,069,957	-0.01%	36,308,845	-0.03%	244,868,120	-0.23%	295,246,922
				ORA	(2)	14,069,957	-0.01%	36,308,845	-0.03%	244,868,120	-0.23%	295,246,922
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

37	9-23	Accumulated Deferred Income Tax (RB)	SUBS	Overland		(57,788,323)	0.04%	(11,713,582)	0.01%	89,052,818	-0.09%	19,550,913
				ORA	(4)	(57,788,323)	0.04%	(11,713,582)	0.01%	89,052,818	-0.09%	19,550,913
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

38	9-21	Excess Deferred Income Tax (RB)	SUBS	Overland	(1)	0	0.00%	12,800,000	-0.01%	38,400,000	-0.04%	51,200,000
				ORA	(4)	0	0.00%	12,800,000	-0.01%	38,400,000	-0.04%	51,200,000
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

ORA	19	ASI - ADSL Development Cost Treatment (RB)	SUBS	Overland		0	0.00%	0	0.00%	0	0.00%	0
				ORA	(3)	0	0.00%	(10,600,000)	-0.10%	(209,176,000)	-2.10%	(219,776,000)
				TURN	(5)	0	0.00%	(10,600,000)	-0.10%	(209,176,000)	-2.10%	(219,776,000)
				Pacific	(10)	0	0.00%	0	0.00%	0	0.00%	0

60a	20-20	Depreciation Expense Timing Adjustment (RB)	SUBS	Overland	(1)	0	0.00%	0	0.00%	1,728,488	0.00%	1,728,488
				ORA	(2)	0	0.00%	0	0.00%	1,728,488	0.00%	1,728,488
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

70a	S6-1	LNP Capital Costs (RB)	SUBS	Overland	(1)	(14,315,457)	0.01%	(32,338,163)	0.03%	(42,836,992)	0.04%	(89,490,612)
				ORA	(4)	(14,315,457)	0.01%	(32,338,163)	0.03%	(42,836,992)	0.04%	(89,490,612)
				TURN	(5)	(14,315,457)	0.01%	(32,338,163)	0.03%	(42,836,992)	0.04%	(89,490,612)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

71a	10-17	AFUDC (RB)	SUBS	Overland	(1)	(2,327,000)	0.00%	(8,370,000)	0.01%	(12,964,000)	0.01%	(23,661,000)
	S10-1			ORA	(2)	(2,327,000)	0.00%	(8,370,000)	0.01%	(12,964,000)	0.01%	(23,661,000)
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0

72	S10-2	PBOP Pre-Funding Plant Adj. (RB)	SUBS	Overland		13,312,000	-0.01%	13,312,000	-0.01%	13,312,000	-0.01%	39,936,000
				ORA	(2)	13,312,000	-0.01%	13,312,000	-0.01%	13,312,000	-0.01%	39,936,000
				TURN	(6)
				Pacific	(7)	0	0.00%	0	0.00%	0	0.00%	0




		Net Income Effect of Audit Corrections		Overland		431,399,621		639,617,502		911,081,711		1,982,098,834
		Net Rate Base Effect of Audit Corrections		Overland		(609,143,885)		(610,423,795)		(258,874,205)		(1,478,441,885)

		Net Income As Reported On Pac Bell IEMR				652,499,328		922,472,419		962,198,083
		Net Income Effect of Audit Corrections		Overland		431,399,621		639,617,502		911,081,711
		Audit-Corrected Net Income		Overland		1,083,898,949		1,562,089,921		1,873,279,794
		0
		Rate Base As Reported On Pac Bell IEMR				10,057,147,720		10,170,676,085		9,963,602,286
		Rate Base Effect of Audit Corrections		Overland		(609,143,885)		(610,423,795)		(258,874,205)
		Audit-Corrected Rate Base		Overland		9,448,003,835		9,560,252,290		9,704,728,081

		Rate of Return As Reported By Pacific Bell				6.49%		9.07%		9.66%
		Rate of Return Impact of Audit Adjustments		Overland		4.98%		7.27%		9.65%
		Audit-Corrected Rate of Return		Overland		11.47%		16.34%		19.30%



		Net Income Effect of Audit Corrections		ORA		428,511,826		623,187,148		1,003,300,454		2,054,999,428
		Net Rate Base Effect of Audit Corrections		ORA		(729,319,885)		(638,336,795)		(338,552,205)		(1,706,208,885)

		Net Income As Reported On Pac Bell IEMR				652,499,328		922,472,419		962,198,083
		Net Income Effect of Audit Corrections		ORA		428,511,826		623,187,148		1,003,300,454
		Audit-Corrected Net Income		ORA		1,081,011,154		1,545,659,567		1,965,498,537

		Rate Base As Reported On Pac Bell IEMR				10,057,147,000		10,170,675,000		9,963,602,000
		Rate Base Effect of Audit Corrections		ORA		(729,319,885)		(638,336,795)		(338,552,205)
		Audit-Corrected Rate Base		ORA		9,327,827,115		9,532,338,205		9,625,049,795

		Rate of Return As Reported By Pacific Bell				6.49%		9.07%		9.66%
		Rate of Return Impact of Audit Adjustments		ORA		5.10%		7.14%		10.76%
		Audit-Corrected Rate of Return		ORA		11.59%		16.21%		20.42%
		Net Income Effect of Retroactive Audit Corrections		PACIFIC	(12)	(7,438,454)		26,011,591		20,229,744		38,802,881
		Net Income Effect of Audit Corrections in Year 2002		PACIFIC	(12)	36,855,318		17,879,942		8,268,949		63,004,209
		Net Rate Base Effect of Audit Corrections		PACIFIC		(146,543,000)		(95,670,000)		(95,453,000)		(337,666,000)

		Net Income As Reported On Pac Bell IEMR				652,499,328		922,472,419		962,198,083


Rate Base Adjustments
27	RB	REG-29	11 - 5, S11 - 5	GH Reply 13	Cash Working Capital (RB) - Reduce cash working capital allowance to correct errors and to reflect audit adjusted expenses.	Adjusts cash working capital allowance to correct 20 errors made in Pacific Bell's lead-lag studies and to reflect audit adjusted expenses.	Concur with most of Overland's adjustments. Also note that Pacific Bell included non-cash items, such as depreciation expense, in CWC calculation, which results in overstatement of rate base. The CWC would be negative if the non-cash items were removed. ORA recommends that CWC instead be set equal to zero. The result is similar to the three-year average rate base effect presented by Overland, and greatly simplifies the IEMR process.	The cash working capital allowance should be set equal to zero for IEMR purposes, the most reasonable option given the considerable doubt as to the accuracy or reasonableness of the utility's cash working capital calculations.
28	RB	REG-30	11 - 28	GH Open 12	Prepaid Directory Expense (RB) - Include prepaid directory expense in rate base.	Rate base should reflect Pacific Bell's actual investment in providing service. Prepaid directory expense represents an investment in providing service that should be included in rate base. D.91-07-056 does not prohibit the correction.	Concur with Overland
29	RB	REG-31	11 - 30	GH Open 12, GH Reply 19	SFAS 112 Liability (RB) - Deduct SFAS 112 liability from rate base.	The accrued SFAS 112 liability represents non-investor supplied capital that should be deducted from rate base. D.91-07-056 does not prohibit the correction.	Concur with Overland
30	RB	REG-32	11 - 31	GH Open 12, GH Reply 19	Vacation Liability (RB) - Deduct accrued vacation liability from rate base.	The accrued vacation liability represents non-investor supplied capital that should be deducted from rate base. D.91-07-056 does not prohibit the correction.	Concur with Overland
31	RB	REG-33	11 - 31	GH Open 12	SFAS 106 Accrued Liability (RB) - Deduct accrued SFAS 106 liability from rate base. Amount depends on resolution of SFAS 106 expense correction.	The accrued SFAS 106 liability represents non-investor supplied capital that should be deducted from rate base. D.91-07-056 does not prohibit the correction.	Concur with Overland
32	RB	REG-34	11 - 34	GH Open 12	Accrued Contingent Liability (RB) - Deduct accrued contingent liabilities from rate base. Amount depends on resolution of expense correction for unauditable contingent liabilities.	Accrued contingent liabilities represent non-investor supplied capital that should be deducted from rate base. D.91-07-056 does not prohibit the correction.	Concur with Overland
33	RB	REG-35	11 - 28, S11 - 6	GH Open 12, GH Reply 19	Prepaid Pension Costs (RB) - Include prepaid pension asset in rate base. Amount depends on resolution of Phase 2A pension expense correction.	Prepaid pension assets represent an investment in providing service that should be included in rate base. D.91-07-056 does not prohibit the correction.	Concur with Overland
34	RB	REG-36	10 - 22	GH Open 3	SFAS 106 Plant (RB) - Reduce 1998 and 1999 plant to reflect CPUC PBOP accounting policy.	Directly related to Phase 2A PBOP expense correction. Pacific Bell wrote-off PBOP regulatory asset in 1998. That write-off included the elimination of a large rate base credit. The Phase 2A PBOP correction reverses the expense impact of the write-off. This correction eliminates the rate base impact of the write-off. The rate base correction should be adopted if the Phase 2A PBOP expense correction is adopted.	Concur with Overland
35	RB	REG-37	10 - 22, S10 - 3		Restructure Reserve (RB) - Reduce net plant to eliminate unsupported and unreasonable jurisdictional adjustment.	Pacific Bell's recorded plant balances include a jurisdictional adjustment for the impact of a 1993 restructuring reserve. The FCC and CPUC accounting treatment of the restructuring reserve was identical. Therefore, there is no basis for the recorded jurisdictional adjustment. Pacific Bell admits it cannot support the jurisdictional adjustment recorded on its books or explain what the adjustment represents..	Concur with Overland
36	RB	REG-38	10 - 23		Accumulated Reserve for Depreciation (RB) - Adjust depreciation reserve to reflect depreciation expense corrections.	Directly related to depreciation expense corrections. This correction adjusts rate base to reflect impact of depreciation expense corrections on accumulated reserve for depreciation.	Concur with Overland
37	RB	REG-39	9 - 23		Accumulated Deferred Income Tax (RB) - Adjust accumulated deferred income taxes to reflect the CPUC's flow-through income tax accounting policy.	The rate base correction should reflect the resolution of the income tax normalization issue in Phase 2A.	Concur with Overland
38	RB	REG-40	9 - 21		Excess Deferred Income Tax (RB) - Adjust Accumulated deferred income taxes to correct accounting error.	This correction is directly related to the income statement correction for excess deferred income tax amortization. The rate base correction should be made if the income statement correction is adopted.	Concur with Overland
ORA	RB				Remove ADSL Development Costs		See corresponding description of income statement adjustment above.	Pacific Bell should not be allowed to recover development costs through NRF rates, then transfer the ADSL service so that future revenues from that service are not reflected in the IEMR. Instead, the ADSL development costs should be removed from the IEMR during the audit period.
60a	RB	NR-01	20 - 20	GO Reply 10	Depreciation Expense Timing Adjustment (RB) - The allocation between regulated and non-regulated activities was not correct on a year-to-date basis. This entry corrects this error.	Contrary to the cost attribution hierarchy adopted by the CPUC in D.91-07-056 (Finding of Fact 11), when correcting a depreciation expense error in December 1999, Pacific Bell employed current regulated / non-regulated allocation ratios which were not reflective of the actual ratios in use at the time when the errors were originally recorded.	Concur with Overland
70a	RB	REG-43; Supp 6	S6 - 1	GH Open 2	LNP Capital Costs (RB) - Reduce net plant to correct a separations error.	The plant costs recovered through the FCC LNP tariff should be directly assigned to the interstate jurisdiction.	Concur with Overland	The costs incurred prior to May 1998 should have been deferred as a regulatory asset pursuant to FAS 71 requirements. Pacific Bell had sufficient information to estimate the probable amount of cost recovery in early 1996.
71a	RB	REG-44; Supp 10	10 - 17, S10 - 1	GH Open 3	AFUDC (RB) - Reduce net plant to correct an accounting error. The AFUDC rates used by Pacific Bell were overstated.	The CPUC basis AFUDC charged to plant during the audit period was excessive. Pacific Bell's AFUDC rate calculations violated Resolution RF-4. Pacific Bell's practice of imputing negative capital sources in its AFUDC rate calculations does not have any basis in regulatory, finance or accounting theory. This correction is directly related to the AFUDC depreciation correction.	Concur with Overland
72	RB	REG-45; Supp 10	S10 - 2	GH Open 3	PBOP Pre-Funding Plant Adj. (RB) - Reduce net plant to eliminate unsupported and unreasonable jurisdictional adjustment.	Pacific Bell's recorded plant balances include a jurisdictional adjustment for the capitalized portion of contributions it made to its PBOP trusts in 1989 and 1990, prior to the adoption of FAS 106. The proper FCC and CPUC basis accounting for the contributions was identical Therefore, there is no basis for the jurisdictional adjustment and it should be eliminated. Pacific Bell properly charged the contributions to expense for FCC purposes. Pacific Bell improperly accounted for contributions as prepaid PBOP assets for CPUC purposes. Pacific Bell's CPUC basis accounting violated CPUC accounting policy and was inconsistent with its accounting for similar contributions made to other PBOP trusts.	Concur with Overland