STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

March 02, 2004 Agenda ID# 3310 (Alternate Order to Agenda ID# 2987)

Ratesetting

TO: PARTIES OF RECORD IN A.99-10-010

Enclosed is Alternate Draft Decision of Commissioner Wood to the Draft Decision of Administrative Law Judge (ALJ) Walker previously mailed to you.

When the Commission acts on this agenda item, it may adopt all or part of it as written, amend or modify it, or set aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Public Utilities Code Section 311(e) requires that an alternate to a draft decision be served on all parties, and be subject to public review and comment prior to a vote of the Commission. Rule 77.6(d) provides that comments on the alternate draft decision be filed at least seven days before the Commission meeting.

Comments on the alternate decision must be filed and served March 9, 2004. Reply comments are due March 12, 2004.

Pursuant to Rule 77.3 comments shall not exceed 15 pages. Finally, comments must be served separately on the ALJ and the assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious method of service.

/s/ ANGELA K. MINKIN

Angela K. Minkin, Chief

Administrative Law Judge

ANG: mnt

Enclosure

COM/CXW/mnt ALTERNATE DRAFT Agenda ID # 3310

(Alternate order to Agenda ID #2987)

Ratesetting

Decision ALTERNATE DRAFT DECISION OF COMMISSIONER CARL WOOD (Mailed 3/2/2004)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of GTE California Incorporated for Authority Pursuant to Public Utilities Code Section 851 to Lease Space to Third Parties and Affiliates, and to Share Certain Assets with Affiliates.

Application 99-10-010 (Filed October 15, 1999)

OPINION

TABLE OF CONTENTS

TITLE PAGE

OPINION 11

OPINION 22

Summary 22

I. License and Lease Agreement 22

Factual Background 22

Nature of Leases and Licenses 44

Third-Party Leasing/Licensing Agreements 44

Affiliate Leasing/Licensing Agreements 55

Environmental Review 77

30-Day Revocation 77

ORA Protest and Verizon Amendment 77

ORA Recommendations 88

Approval of Lease and License Agreements 99

II. Shared Asset Methodology 1212

Proposed Accounting Method 1212

Remaining Issues 1414

ORA Recommendations on Shared Asset Methodology 1414

Verizon's Response to ORA Recommendations 1616

Discussion of Shared Asset Methodology Proposal 1717

Should the Methodology Take the Place of 851 Filings? 1919

Further Investigation 2525

Categorization of Proceeding 2525

Comments on Draft Decision 2626

Assignment of Proceeding 2727

Findings of Fact 2727

Conclusions of Law 2828

ORDER 2929

OPINION

Summary

Verizon California Inc. (Verizon) has amended this 1999 application, which now seeks approval under Pub. Util. Code § 851 of 18 lease and license agreements, as well as other relief. The amendment incorporates recommendations by the Commission's Office of Ratepayer Advocates (ORA) based on ORA's audit of Verizon in the fourth triennial review of the New Regulatory Framework, or NRF.¹ We approve these agreements and also approve Verizon's shared asset methodology of dealing with office space and office equipment used by three Verizon affiliates that perform administrative functions for Verizon and other subsidiaries of Verizon's parent company. We also approve an option by which Verizon in the future may make a triennial filing for Section 851 approval of space and office equipment leases by three affiliates, subject to the shared asset methodology of accounting and subject to annual advice letter updates. Our order closes this proceeding.