II. Background

In Decision (D.) 89-10-031, the Commission adopted a NRF for Verizon (formerly GTE California Incorporated) and Pacific Bell (Pacific) and concluded that it retained its responsibility and authority over stock and security transactions, consistent with §§ 816-830. In order to ensure the successful implementation of NRF, the Commission established monitoring goals and implemented a monitoring program. One goal is financial and rate stability, and the Commission concluded that it would monitor Verizon's applications filed under §§ 816-830 as one tool to achieve that goal. Another NRF goal is avoidance of cross-subsidies and anti-competitive behavior to prevent Incumbent Local Exchange Carriers (ILECs) from subsidizing competitive services with less competitive services.

In Rulemaking (R.) 01-09-001 and Investigation (I.) 01-09-002, the Commission will assess and revise Verizon's and Pacific's NRF. In Phase III, the Commission will consider revisions to the NRF monitoring reports. Parties will be able to propose new monitoring reports and the elimination of existing monitoring reports. In Phase I of the NRF reassessment, the Commission will consider the Verizon audit, which included an analysis of Verizon's monitoring reports.

In this application, Verizon requests exemption from Commission approval of its issuance of financial instruments, including stocks, bonds, and notes, under §§ 816-830. Verizon further seeks exemption from the requirements of § 851 whenever such transfer or encumbrance serves to secure debt. Finally, Verizon requests that the Commission no longer apply its Competitive Bidding Rule to Verizon. In support of the Application, Verizon includes the Declaration of Robert G. Deter, Manager-Financial Analysis for Verizon's Treasury Department and Assistant Treasurer of Verizon California. Deter describes various circumstances under which Verizon seeks financing to demonstrate his claim that Commission preapproval has disadvantaged Verizon. The timeframes involved in taking advantage of favorable opportunities are too short-often only days-to seek Commission approval, which typically takes several months. As a result, Verizon has had to forgo structured financing, below-market financing opportunities offered by brokers, immediate refinancing of debt, retail sales of securities, and selling securities in both the domestic and overseas markets on an opportunistic basis at below-market rates. Verizon cannot request pre-approved authority to issue long-term debt securities from the Commission that would anticipate all types of financing opportunities. In addition, Verizon is hampered in requesting such pre-approval by the Competitive Bidding Rule, which negates private placements, by the detail required under Rule 33 of the Commission's Rules of Practice and Procedure, and by the Commission fees required under Pub. Util. Code § 1904(b).

Verizon's application was noticed in the Daily Calendar on April 20, 2001. There were no protests.