XIV. Service Quality

D.96-12-074 ordered RTC to provide as part of its NRF review a comparison of service quality measurements before and after NRF implementation. RTC submitted the required data which demonstrated that it has exceeded all General Order (GO) 133-B service quality measurement standards since becoming a NRF company. The data also shows that in most areas that are measured under those standards, service quality under NRF is better than before NRF.

A. ORA

ORA agrees that RTC's service quality is in compliance with GO 133-B service quality standards. However, ORA recommends that the Commission implement customer service guarantees for RTC. The guarantees would apply to new installations and repair orders. The purpose is to ensure that RTC's current level of customer service does not decline. ORA states that its proposal is an incentive, rather than a punitive measure. The guarantees consist of rebates to customers when new installations or repairs are delayed beyond specified times.

B. RTC

RTC opposes customer service guarantees. ORA made similar proposals in RTC's last GRC and the Commission rejected them. RTC states that competition provides it with a sufficient incentive to maintain service quality. Additionally, according to RTC, ORA's proposal is inconsistent with the move toward competition. RTC also contends that in D.00-03-052 in R.98-06-029, the Commission rejected similar proposals by ORA to modify GO 133-B.

C. Discussion

ORA correctly points out that GO 133-B does not include standards for the length of time that telephone companies should take to install and repair telephone service.⁷ ORA's service guarantee proposal would provide incentives for RTC to complete installations and repairs in a timely manner. If the record disclosed any indication that customers have been adversely affected by any service quality deteriorations under NRF, we would be inclined to adopt ORA's recommendation. However, ORA has not made such a showing. Accordingly, we reject ORA's proposal.

In so concluding, we nevertheless underscore the importance of ensuring that our regulatory policies - including the use of incentive frameworks such as NRF - promote high quality customer service, particularly for those customers who are served by monopoly or near-monopoly providers. We encourage ORA to continue to monitor RTC's service quality and to take full advantage of its statutory discovery rights in so doing. ORA should not hesitate to bring to the Commission's attention any significant deterioration in RTC's service quality that it may detect.

Findings of Fact

1. A.99-03-025 appeared in the Commission's Daily Calendar on March 18, 1999.

2. RTC's three-factor formula for allocating common general and administrative expenses does not reflect cost causation and leads to an under-allocation of such expenses to unregulated affiliates.

3. Sharing should have occurred in 1998 in the amount of $419,505.

4. The adopted audit calculations as discussed in VI. C, D and E, herein, are reasonable.

5. The adopted audit calculations show that RTC has effectively cross-subsidized its affiliates at the expense of the reported earnings of RTC.

6. RTC's cross-subsidization had the effect of preventing sharing that otherwise would have occurred.

7. The sharing mechanism serves to limit the benefits that shareholders may reap from improper cost shifting.

8. RTC's customers have never experienced rate reductions from the inflation minus productivity portion of the NRF formula.

9. The sharing mechanism is an important means by which we can allow ratepayers at least an opportunity to gain some tangible benefits from NRF regulation.

10. The record does not show that the sharing mechanism has had an adverse effect on RTC's innovation and new investment.

11. Sharing only affects services for which competition is either weak or non-existent and does not put RTC at a competitive disadvantage.

12. Elimination of depreciation reviews will foreclose any potential franchise impact claims covering investments and depreciation from the day the elimination is effective, forward.

13. The parties agree that depreciation reviews should be eliminated.

14. The parties agree that the suspension of the I-X portion of the price adjustment formula should continue.

15. Elimination of Z-factor adjustments is consistent with suspension of sharing and simplifies the regulatory process.

16. The parties agree that new Z-factor adjustments should be eliminated and an LE factor mechanism should be adopted.

17. RTC has never filed for a Z-factor adjustment for PBOP.

18. RTC's PBOP trust is well funded.

19. RTC has not put all of the PBOP revenues for 1997, 1998 and 1999 in the PBOP trusts. The excess revenues were invested.

20. D.96-12-074 trued up RTC's PBOP costs prior to 1997.

21. The NRF PBOP requirements in D.92-12-015 apply to RTC.

22. Decreases in RTC's PBOP revenue requirements should have been addressed in Z-factor filings.

23. ORA and RTC agree to the amended monitoring requirements listed in Attachment A.

24. ORA and RTC agree to the withdrawal of RTC's request to modify the pricing flexibility rules.

25. The Commission approved RTC's Advice Letter 423 in Resolution T-16276 and imposed an imputation requirement.

26. RTC's service quality is in compliance with G.O. 133-B.

Conclusions of Law

1. RTC should amend its 1999 sharable earnings filing to reflect the adjustments adopted in VI. C, D and E.

2. RTC's sharing mechanism should be retained until further order of this Commission.

3. RTC's sharable earnings filings for future years, beginning with earnings for the year 2000, should reflect the adjustments in VI. C and D based on recorded data for the applicable year.

4. RTC should amend its accounting practices to reflect the adjustments in VI. C and D herein.

5. RTC should amend its 1999 sharable earnings filing to add $419,505 to its 1999 sharable earnings that should have been shared for 1998.

6. RTC should correct its affiliate transaction accounting practices to reflect the adjustments adopted herein.

7. Depreciation reviews should be eliminated.

8. The suspension of the I-X portion of the NRF price adjustment formula should be continued.

9. New Z-factor adjustments should be eliminated.

10. Z-factor adjustments currently before the Commission should be considered.

11. Z-factors now being implemented should finish implementation.

12. LE factor recovery of non-regulated operations audit costs should be allowed.

13. An LE factor mechanism as established in D.98-10-026 should be established for RTC.

14. RTC's annual revenue requirement should be reduced by $98,600 for PBOP.

15. RTC should return to ratepayers the PBOP revenues that were not placed in the PBOP trust plus the earnings on the investment of these funds by RTC. Once the revenues have been returned to ratepayers and the $98,600 annual PBOP revenue requirement has been eliminated, the Z-factor adjustment should cease.

16. The amended monitoring requirements specified in Attachment A should be adopted.

17. Imputation as specified in Resolution T-16276 is beyond the scope of this proceeding.

18. ORA should be allowed additional time to review RTC's amended 1999 shareable earnings filing.

19. In order to implement the changes to RTC's NRF as soon as possible, this order should be effective immediately.

ORDER

IT IS ORDERED that:

1. Application 99-03-025 is approved only to the extent indicated below. In all other respects, it is denied.

2. Roseville Telephone Company (RTC) shall, within 90 days of the effective date of this decision, amend its 1999 sharable earnings filing to reflect the adjustments adopted in VI. C, D and E and to include $419,505 plus interest, that should have been shared in 1998.

3. In preparing its amended 1999 shareable earnings filing, RTC may utilize 1999 full year recorded data for Audit Calculation 32.

4. The amended 1999 shareable earnings filing shall include interest calculated in accordance with Ordering Paragraph 16 of Decision 89-10-031.

5. RTC shall provide the Office of Ratepayer Advocates with an advance copy of its amended 1999 shareable earnings filing, including complete workpapers, 30 days before it is filed.

6. RTC's sharable earnings filings for future years, beginning with earnings for the year 2000 shall reflect the adjustments adopted in VI.C and D based on recorded data for the applicable year.

7. RTC shall amend its accounting practices to reflect the adjustments adopted in VI. C and D.

8. RTC's sharing mechanism shall continue in effect until further order of this Commission.

9. Depreciation reviews are eliminated.

10. The I-X portion of the price adjustment formula is suspended.

11. Z-factor adjustments are eliminated except as specified below.

12. Z-factors now being implemented shall be allowed to finish implementation.

13. An LE factor mechanism as established in D.98-10-026 is established for RTC.

14. Within 60 days, RTC shall file an advice letter to refund post retirement benefits other than pensions (PBOP) revenues not placed in the PBOP trust during 2000, as well as the proceeds from the investment of these funds, and to reduce its 2001 annual revenue requirement by $98,600 as a surcredit. The $98,600 annual revenue requirement reduction is permanent.

15. Within 60 days RTC shall file an advice letter to make a Z-factor adjustment to return to ratepayers PBOP revenues for 1997 through 1999 that were not placed in the PBOP trust, as well as the proceeds from the investment of these funds.

16. The amended monitoring requirements specified in Attachment A are adopted.

17. This proceeding is closed.

This order is effective today.

Dated ______________, at San Francisco, California.

18.

ATTACHMENT A

#	NRF MONITORING REPORT CODE	REPORT NAME	FREQUENCY	REPORT DESCRIPTION
1	R.A.01-00	G.O. 152, Private Line Alarm	Quarterly	Uniform standards for the installation, maintenance, and operation of private line alarm service provided by telephone utilities.
2	R.A.01-01	G.O. 133-C Telephone Service Levels	Quarterly	Uniform standards for the installation, maintenance , and quality of telephone service.
3	R.A.02-00	Report on Informal Service Complaints (Proprietary)	Quarterly	Identifies the number of informal customer complaints by category of complaint.
4	R.A.02-01	Quality Improvement and Cost Reduction Programs (Proprietary)	Upon Request	Identifies all significant capital and/or expense planned to be incurred in quality improvement and cost reduction programs that RTC intends to begin in the following year.
5	R.A.02-02	Notification of Major Service Interruption	Per Occurrence	Measures customer and network impacts of service interruptions, and details the cause of the failure and restoration of service.
6	R.A.02-03	Summary of Major Service Interruption	Monthly	Summarizes instances of service interruptions shown in the Major Service Interruptions Report.
7	R.A.02-04	G.O. 95 Underground Conversions	Upon Request	Provides information on the underground conversion of existing facilities.
8	R.A.02-05	Quality of Service Performance Report (Proprietary)	Quarterly	Measures service quality based on customer opinions. Used to monitor service quality.
9	R.A.04-00	Detailed Schedule of Access Lines (Proprietary)	Quarterly	Provides a detailed schedule of residential, business and other switched access lines.
10	R.A.05-00	Summary of Category II Rate Changes	Annually	Reflects the changes in rates for Category II services.
11	R.A.XX-00	G.O. 95, Accident & Line Statistics	Annually	Provides information on facility related accidents and line statistics.
12	R.A.XX-01	Customer Information Notices	Quarterly	Bill inserts sent to customers, pursuant to legislative and CPUC orders.
13	R.A.XX-02	Emergency Spanish Language Assistance Bureau (ESLAB)	Annually	Details the requirements for bilingual services to be provided by telephone utilities in the State of California.
14	R.A.XX-03	Non-English Speaking Percentage by Exchange	Annually	Identifies serving areas/exchanges where non-English speaking minorities comprise 5% or more of the population.
15	R.A.XX-04	G.O. 107-B, Practice Used to Assure Privacy & Secrecy	As Issued	Contains notification of any changes in the company's internal employee practice regarding the privacy of and/or secrecy of communications.
16	R.A.XX-05	G.O. 107-B, Telephone Tap Devices Discovered (Proprietary)	Annual	Contains information on instances where a wire tap device is reported, found or believed to be installed.
17	R.A.XX-06	G.O. 95, Infraction Cleared	Monthly	Details information regarding an infraction and the date of clearance.
18	R.A.XX-07	Universal Lifeline Telephone Service (ULTS)	Quarterly	Financial statement for the ULTS fund, and includes the number of ULTS users.
19	R.B.01-00	Expense Matrix (Proprietary)	Quarterly	Provides the types of costs incurred, costs and hours per workload indicator and employee force count data on a functional basis.
20	R.C.01-00	1 Year Capital Budget Summary & Network Planning Report (Proprietary)	Annually	Information on capital costs associated w/assets, growth, replacement, drivers, projects, products & services. (Includes previous reports R.C.XX-00, R.C.XX-01, R.C.XX-02 & R.F.03-00)
21	R.D.01-00	Monthly Operations Report (Proprietary)	Monthly	Provides company financial data such as; income statement , balance sheet, and analysis of operating expenses and revenues.
22	R.D.04-00	Separated Results of Operations (101 Report) (Proprietary)	Monthly	Provides information on RTC's operations in the state and interstate jurisdictions. Separated operating revenue, expense, rate of return and rate base information is included in this report.

23	R.D.07-00	Service Specific Revenue and Cost Data for Categories I, II & III, Including New Services. (Proprietary)	Quarterly	Contains income statement information for NRF categories I, II & III, and new services, including cost data when available. (Includes previous reports R.F.01-00 & R.F.01-NS00).
24	R.D.XX-00	G.O. 104-A, Report to FCC, Form M	Annually	An annual report that contains balance sheet, income statement and operational data.
25	R.D.XX-01	Annual Report to Shareholders (SEC 10K)	Annually	Contains income statement information, balance sheet information, and operational data.
26	R.D.XX-02	Quarterly Report to Shareholders (SEC 10Q)	Quarterly	Contains income statement information, balance sheet information, and operational data.
27	R.D.XX-03	Interest During Construction (IDC)	Annually	Report shows mechanics of using quarterly indices to derive a monthly IDC rate to book amount of IDC each month.
28	R.D.XX-04	G.O. 77-K, Membership Dues, Contributions & Donations (Proprietary)	Annually	Contains data on membership dues, contributions, donations and salaries over $60,000.
29	R.D.XX-06	G.O. 96-A Tariff Contracts & Deviations	Annually	Provides information for those contracts and services rendered at rates or under conditions other than provided in RTC's filed tariff schedules.
30	R.D.XX-07	Weighted Average Cost of Capital	Annually	Provides financial data used to calculate the weighted average cost of capital for a rolling 12 month period.
31	R.D.XX-08	DEAF Trust	Quarterly	Lists agencies that request TDD's, agencies that are supplied TDD's and provides an explanation when requests are denied.
32	R.E.01-00	Central Office Equipment Deployment & Utilization Forecasts (Proprietary)	Annually	Provides annual forecasted switching data by switching technology.

33	R.E.01-01	Interoffice Facilities Deployment & Utilization (Proprietary)	Annually	Provides annual utilization forecasts for interoffice facilities by geographic area, by technology, by channels, by capacity working and by percent utilization.
34	R.E.01-02	Outside Plant Deployment & Utilization Forecasts (Proprietary)	Annually	Provides annual forecasts for outside plant by technology and geographic operating areas.
35	R.F.06-00	Affiliate Company Transactions & Intercompany Activities	Per Occurrence	Provides information on the sale or transfer of RTC assets to affiliates, transfer of employees to affiliates and organizational changes.
36	R.F.08-00	Notification of Diversification Activities (Proprietary)	Per Occurrence	Designed to provide timely notification of RTC's intentions to diversify its business activities.
37	R.F.09-00	Complaints From Competitors (Proprietary)	Per Occurrence	To provide information regarding informal complaints made by competitors.
38	R.F.XX-00	Service Specific Tariff Imputation Report (Proprietary)	Annually	Track the tariff rates of monopoly services bundled with competitive services under one Category II rate and compare that sum to the floor price of the bundled service.
39	R.X.XX-00	Results of Operations (bound) Annual Form M	Annually	Provides a comprehensive view of RTC's operations. Contains financial and operational information and statistics, and summaries of major Commission decisions impacting RTC.
40	R.X.XX-01	Shareable Earnings	Annually	Shows the sharing (if any) of revenues that RTC has earned in the previous year.

(END OF ATTACHMENT A)

CERTIFICATE OF SERVICE

I certify that I have by mail this day served a true copy of the original attached Alternate Proposed Decision of Commissioner Lynch on all parties of record for Application 99-03-025 or their attorneys of record.

Dated June 14, 2001, at San Francisco, California.

/s/ ANN B. WHITE

Ann B. White

NOTICE

Parties should notify the Process Office, Public Utilities Commission, 505 Van Ness Avenue, Room 2000, San Francisco, CA 94102, of any change of address to insure that they continue to receive documents. You must indicate the proceeding number on the service list on which your name appears.