IV. Substantial Contribution
In evaluating whether a customer made a substantial contribution to a proceeding, we look at several things. First, did the ALJ or Commission adopt one or more of the factual or legal contentions, or specific policy or procedural recommendations put forward by the customer? (See § 1802(i).) Second, if the customer's contentions or recommendations paralleled those of another party, did the customer's participation materially supplement, complement, or contribute to the presentation of the other party or to the development of a fuller record that assisted the Commission in making its decision? (See §§ 1801.3(f) and 1802.5.) As described in § 1802(i), the assessment of whether the customer made a substantial contribution requires the exercise of judgment.
In assessing whether the customer meets this standard, the Commission typically reviews the record, composed in part of pleadings of the customer and, in litigated matters, the hearing transcripts, and compares it to the findings, conclusions, and orders in the decision to which the customer asserts it contributed. It is then a matter of judgment as to whether the customer's presentation substantially assisted the Commission.5
Should the Commission not adopt any of the customer's recommendations, compensation may be awarded if, in the judgment of the Commission, the customer's participation substantially contributed to the decision or order. For example, if a customer provided a unique perspective that enriched the Commission's deliberations and the record, the Commission could find that the customer made a substantial contribution. With this guidance in mind, we turn to the claimed contributions TURN made to the proceeding.
TURN claims it played a distinctive role in this proceeding. TURN submitted several rounds of expert testimony and comments critiquing both the incumbent's and competitors' cost models and affirmative cases. TURN's witnesses dedicated time and resources to learning and running each of the models themselves. This effort allowed TURN to independently evaluate the usability of each of the competing models, critically analyze the inputs used for each model, compare the results of these models with each other by directly manipulating inputs and output values, and suggest alternative inputs and new data to provide the Commission with the most accurate and complete record upon which to base its decision.6 TURN's work significantly enhanced the record by providing a third alternative pricing proposal to ensure adherence to the Federal Communication Commission's (FCC) long-run incremental cost methodology and the Commission's own Consensus Costing Principles.
Ultimately, TURN recommended that the Commission adopt the JCs' proposed model, HM 5.3, with some revisions, and use HM 5.3 to generate the appropriate rates for Verizon's UNEs and price floors. D.06-03-025 adopted HM 5.3 and, as discussed below, also adopted TURN's specific critiques and recommendations on many other issues.
TURN's contributions are analyzed in three categories: Model Comparison; Model Inputs; and Price Floors.
A. Model Comparison
TURN reviewed the JCs' HM 5.3 model and Verizon's VzCost model. TURN analyzed, among other things, whether the models were capable of producing forward-looking results, whether they allowed for user-adjustable inputs, and whether they were integrated across their various modules. We agreed with TURN that the JCs' HM 5.3 model provided the best options, and we adopted HM 5.3 as the model to develop Verizon's permanent UNE rates. (D.06-03-025, p. 57.) Further, D.06-03-025 cites TURN's arguments that the Verizon model is not forward-looking (D.06-03-025, p. 21) and lacks integration (D.06-03-025, p. 30).
B. Model Inputs
TURN analyzed the model inputs proposed by the JCs and Verizon, as well as its own proposal. TURN made substantial contributions in the following six areas:
1. D.06-03-025, at pp. 60-61, discusses whether to adopt Verizon's proposed asset lives, based on a study performed by Technology Futures, Inc. While we did not adopt TURN's arguments, we analyzed TURN's testimony in detail and used that testimony, in part, as an explanation for the decision to adopt Verizon's proposed asset life inputs.
2. TURN analyzed proposals on cost of capital factors to create a more substantial record and justification for the final outcome. D.06-03-025 cited TURN's analysis and adopted TURN's position on capital structure; however, TURN's proposal for cost of debt was not adopted.
3. TURN proposed we rely on the FCC's structure sharing results from the Virginia Arbitration. (D.06-03-025, p. 88.) While we did not adopt TURN's specific numerical proposal on structure sharing, we did adopt TURN's suggestion to take a "middle ground" between the JCs' and Verizon's proposals, and look to the FCC for the input values.
4. We agreed with Verizon's criticisms of the JCs' labor rate input and assumptions used in HM 5.3. TURN did not agree with this method, but pointed out that if the Verizon labor rates were used, they should be adjusted to remove excess material costs from some of the individual rates. TURN's recommendations were adopted in this regard. (D.06-03-025, p. 100.)
5. With regard to the switching module, we agreed with TURN that Verizon's switch was not a forward-looking switch type. (D.06-03-025, pp. 40, 103.)
6. TURN disagreed with Verizon's method of calculating its shared and common cost markup. We noted TURN's testimony finding that the VzCost model should be rejected based on its treatment of expenses related to retail services. (D.06-03-025, pp. 114-115.) We rejected Verizon's proposal and agreed with TURN that the HM 5.3 model should be used to generate the markup.
C. Price Floors
D.06-03-025 sets price floors for Verizon's retail services. TURN strongly criticized Verizon's methodology for setting price floors. We agreed with TURN and found the proposed price floors unreasonable. We rejected use of the Verizon cost model and its inputs and assumptions, and found those inputs and assumptions were not forward-looking. (D.06-03-025, p. 129.) We did not adopt the specific price floor methodology supported by TURN, but rejected Verizon's proposal based in part on TURN's comments.
In conclusion, while we did not adopt TURN's position on each issue, TURN's contributions were evident in many areas. D.06-03-025 cites TURN's advocacy on many issues, and we find that TURN's participation provided a unique perspective on unusually complex technical matters. Overall, we find TURN made a substantial contribution to D.06-03-025.
D. Duplication
Section 1801.3(f) requires an intervenor to avoid unnecessary participation that duplicates that of similar interests otherwise adequately represented by another party, or unnecessary for a fair determination of the proceeding. Section 1802.5, however, allows an intervenor to be eligible for full compensation if its participation materially supplements, complements, or contributes to that of another party if that participation makes a substantial contribution to the Commission order.
TURN and the Commission's Office of Ratepayer Advocates (ORA)7 represented the interests of California's consumers. TURN states that it took all reasonable steps to keep any duplication to a minimum and ensured that its work served to complement and assist the showings of the other parties to the case.8 TURN and ORA occasionally filed joint pleadings and shared workload responsibility.
Verizon states that TURN failed to account for the extent to which its work was duplicative of the objections of the JCs and other parties. Verizon argues that the competitive local exchange carriers repeatedly found their testimony mirrored by that of TURN, such that the proceeding would not likely have reached a different result in TURN's absence. Verizon points out from D.06-03-025: 1) TURN echoes the complaints of the JCs relating to aspects of the VzLoop model that are not forward-looking (D.06-03-025, p. 20); 2) TURN and ORA echo the JCs support for removal of Verizon's switches from the cost studies (D.06-03-025, p. 37); and 3) TURN agrees with the proposal of the federal agencies in this proceeding on the issue of asset lives (D.06-03-025, p. 60). Verizon also claims several instances where TURN's testimony either overlapped with those put forth by the JCs, or where TURN's contribution added little or nothing to the outcome.
Verizon requests that the Commission apply a 25% discount to those portions of TURN's request that exhibited an overlap. Verizon additionally requests the award be further reduced to account for TURN's positions or recommendations not adopted in the decision.
TURN acknowledges that its positions overlapped with various parties on certain issues. However, we find that TURN provided an independent and necessary role in this proceeding. TURN and ORA represented consumer interests, and both independently reviewed the positions and recommendations of Verizon, the JCs, and other parties. TURN disagreed with aspects of the JCs' model, and with certain inputs that could potentially understate costs.9
The record is clear that TURN worked in conjunction with other parties in the subject phase (Verizon UNE) of this proceeding. However, we find TURN's participation materially supplemented, complemented or contributed to the efforts of the other parties, and therefore make no reduction to its award here.
5 D.98-04-059, 79 CPUC 2d, 628 at 653.
6 This additional effort is reflected in the time sheets of TURN's experts Loube and Kennedy as they dedicated significant resources to this effort. As D.06-03-025 states several times, both models, but in particular Verizon's cost models, were extremely difficult and time consuming to work with. (D.06-03-025 at pp. 41, 56.) In addition, Verizon filed many supplements to its testimony and made numerous changes to its models requiring additional analysis each time. TURN maintains the number of hours its consultants spent working with VzCost and HM 5.3 is reasonable and compares favorably to the hours spent by JCs' or Verizon's expert consultants.
7 Pursuant to Senate Bill 608, the Office of Ratepayer Advocates (ORA) became the Division of Ratepayer Advocates (DRA), effective January 1, 2006.
8 For example, TURN limited its discovery requests in this proceeding by first reviewing discovery propounded by the JCs and ORA and only sending additional requests that supplemented existing discovery or covered new territory.
9 See D.06-03-025 at p. 106, "TURN agrees with Verizon in opposing a flat port charge . . . ," and D.06-03-025 at pp. 65, 70 where TURN proposed different numbers for cost of equity and cost of debt.
