7. True-up and Treatment of Balances in Memoranda Accounts

The FAR adopted in the ILS Interim Opinion ordered Pacific and GTE (now Verizon) each to maintain a memorandum account to record revenues from

the monthly recurring charge for access to the HFPL. The FAR also held that the memorandum account would be subject to interest, either by the application of interest on the balance, or the application of interest on any amounts later subject to true-up adjustments. (FAR at OP 8.)

In the FAR in our interim line sharing phase, we indicated that the amounts in the memoranda accounts would be subject to true-up. The purpose of a true-up is to reimburse carriers for overcharges or undercharges in the amount charged for the HFPL between the time the interim rates went into effect, and the implementation of permanent rates adopted in this decision. In this decision, we adopt an HFPL rate of $2.48 for Pacific, while the interim rate was $5.85, for a difference of $3.37. Pacific shall reimburse carriers (including its affiliate ASI) which purchased the HFPL over the past several months since the interim rates went into effect with $3.37 per month/per line. Since we adopted the same rate for Verizon as was adopted in the interim phase, Verizon is not subject to the true-up provisions.

Parties were put on notice in the ILS phase of the possibility of a true-up,⁴⁰ and in its Line Sharing Order, the FCC acknowledged that states might need to issue interim arbitration awards, subject to a true-up:

In addition, as explained in more detail below, we strongly encourage the states of issue interim arbitration awards setting out the necessary rates, terms, and conditions for access to this unbundled network element, with any unresolved issues subject to a true-up when the state commission completes its arbitration.⁴¹

ORA asserts that the balance in the memorandum accounts should be used to reduce Pacific and Verizon's voice customers' rates such that the reduction in revenues from voice customers matches the increase in revenues from line sharing service. It is only equitable that voice customers should realize reduced rates as a result of increased revenues from line sharing if those revenues are greater than the ILEC costs associated with use of the HFPL. ORA proposes that the money in the memorandum accounts be returned to ratepayers through the CHCF-B.

With the exception of those Pacific revenues which are subject to the true-up described above, we will treat the revenues in each ILEC's memorandum account in much the same way that we have treated HFPL revenues on a going-forward basis, as described in the proceeding section. Each ILEC shall return those amounts in the memo accounts, with interest, to the CLECs that leased the HFPL for return to the CLECs' DSL customers. Parties should comment on the feasibility of this proposal in the case of CLECs that are going through bankruptcy and no longer provide DSL service. Is there a way to return the money to their DSL customers?