ALJ/KAJ/abw Mailed 11/22/2000

Decision 00-11-039 November 21, 2000

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Roseville Telephone Company (U 1015 C) to Review Extended Area Service Compensation and Establish Replacement Revenue Funding.

Application 99-08-043 (Filed August 20, 1999)

E. Garth Black, Mark Schreiber, and Sean P. Beatty, Attorneys at Law, Cooper, White & Cooper, L.L.P., for Roseville Telephone Company, applicant.

Sindy J. Yun, Attorney at Law, for the Office of Ratepayer Advocates, protestant.

Colleen O'Grady, Attorney at Law, for Pacific Bell Telephone Company, intervenor.

OPINION 2

1. Summary 2

2. Procedural History 3

3. History of EAS Arrangements between Pacific and Roseville 6

4. The Settlement Transition Agreement 7

5. Should the Current EAS Payment from Pacific to Roseville be Discontinued? 8

5.1. Roseville's Position 8

5.2. Pacific's Position 8

5.3. ORA's Position 9

5.4. Discussion 10

6. Should the Commission Adopt Replacement Funding for the EAS Revenues Roseville Receives from Pacific? 13

6.1. Roseville's Position 13

6.2. ORA's Position 19

6.3. Pacific's Position 26

6.4. Discussion 27

7. Overview of Proposals for Alternative Funding Source 28

7.1. Use of the CHCF-A as an Alternative Funding Source 28

7.1.1. Background 28

7.1.2. Roseville's Position 29

7.1.3. ORA's Position 34

7.1.4. Pacific's Position 38

7.1.5. Discussion 39

7.2. Use of the CHCF-B as an Alternative Funding Source 43

7.2.1. Background 43

7.2.2. Roseville's Position 44

7.2.3. ORA's Position 45

7.2.4. Discussion 46

7.3. Use of Funding Sources, Other than CHCF-A and CHCF-B 47

7.3.1. Roseville's Position 47

7.3.2. ORA's Position 48

7.3.3. Pacific's Position 51

7.3.4. Discussion 51

7.4. Temporary Replacement Revenues for Roseville 61

8. Should Pacific Refund the $11.5 Million to its Ratepayers? 66

8.1. ORA's Position 66

8.2. Pacific's Position 70

8.3. Discussion 74

9. Comments on Proposed Decision 78

FINDINGS OF FACT 78

CONCLUSIONS OF LAW 80

ORDER 82

OPINION

1. Summary

In this decision, we authorize Pacific Bell (Pacific) to terminate its annual Extended Area Service (EAS)¹ payment of $11.5 million to Roseville Telephone Company (Roseville or RTC). We deny Roseville's proposal that the EAS revenue be recovered on a permanent basis from the California High Cost Fund-A (CHCF-A) or CHCF-B and order the assigned Administrative Law Judge (ALJ) to prepare an Order Instituting Investigation (OII) to review Roseville's revenue requirement to determine whether recovery of the $11.5 million should come from Roseville's shareholders or from its ratepayers in the form of rate increases, or a combination of the two.

We authorize replacement funding on an interim basis using the current reserve in the CHCF-B. Roseville will be eligible to receive the funding during the pendency of the OII to determine a permanent replacement mechanism for the EAS revenues that it currently receives from Pacific, as long as Roseville cooperates fully in the OII. This will protect the financial interests of Roseville and its ratepayers while the Commission conducts its OII and makes a final determination as to the proper method of revenue recovery.

We determine that Pacific is not required to refund the $11.5 million to its ratepayers, once it discontinues making its payments to Roseville.