E. Discussion

We concur with the small LECs' request to extend the waterfall at 100% for one additional year to 2001 for the small LECs which are the subject of this proceeding.

The waterfall provision was established in D. 88-07-022. The rules governing the fund were developed in Investigation (I.) 87-11-033, and other dockets which have since been closed. To conform with the requirements of Pub. Util. Code § 1708, parties on the service list for I.87-11-033⁴ were mailed copies of the "Scoping Memo and Ruling of Assigned Commissioner," dated January 11, 2000. The Scoping Memo indicated that we could make changes to the rules governing the CHCF-A as part of this proceeding. Therefore, all interested parties have had notice and an opportunity to be heard relating to any changes we may order in the rules for the CHCF-A. We will therefore order that the waterfall provision be modified to extend the 100% funding provision for one additional year for the small LECs that are parties to this proceeding. We wish to make it clear that we are not ordering a permanent alteration to the waterfall provision, but rather a one-time deviation from our adopted policy due to the unique circumstances of this proceeding.

Also, we need to clarify that this one-time deviation in the CHCF-A's waterfall provision does not apply to small LECs which are not parties to this proceeding. Those small LECs are not impacted by the outcome of this proceeding and are in a position to be able to file GRCs in 2000, and thus able to maintain their CHCF-A funding at the 100% level, while their GRCs are pending.

The small LECs have enumerated all of the issues in this proceeding, each of which will have a significant impact on the small LECs' revenues. We recognize that this uncertainty about their future revenues makes it difficult, if not impossible, for the small LECs which are parties to this proceeding, to prepare GRC filings before we issue our decision in the proceeding.

However, there is one aspect of this situation which concerns us. If the 13 small LECs which are parties to this proceeding file GRCs at the same time, at the end of 2001, it will place a significant strain on Commission resources to deal with the GRCs. We would prefer to see the GRCs filed over a two-year period, half in 2001 and half in 2002. If we do decide to stagger the filings, we will extend the waterfall for an additional year for the small LECs ordered to file their GRCs in 2002 instead of 2001. We ask parties to comment on the feasibility of instituting two cycles of GRCs. We also ask parties to propose a fair method for determining which specific companies file in 2001 and which in 2002.

ORA asserts that, even if the waterfall is reset to 100% for one year, any draws from the CHCF-A should be subject to the means test. Under the current rules governing the CHCF-A, any draws from the fund are subject to the means test, and we do not intend to change that rule at this time.