C. Parties' Positions

The Small LECs view Question "a" above as constituting a rate case plan. The Small LECs remind the Commission that the waterfall applicable to CHCF-A draws amounts to a rate case plan and point out that no record has been developed in this proceeding to require the small LECs to file rate cases.

According to the Small LECs, it is unlikely that the companies would file GRCs in the same year. The current combination of the waterfall and means test on existing CHCF-A funding, when coupled with a large fixed permanent funding amount, will ensure that rate cases will be staggered without the necessity of a specific order to that effect by the Commission. However, if the Commission orders a staggered rate case cycle, the order of filing should be negotiated by Telecommunications Division staff and the small companies.

In their Reply Comments, the Small LECs point out that the Commission has already definitively determined that if it orders a two-year filing schedule, it intends to extend the waterfall another year. Decision 00-09-072 states as follows:

"If we do decide to stagger the filing, we will extend the waterfall for an additional year for the small LECs ordered to file their GRCs in 2002 instead of 2001." (D.00-09-072 at 9.)

According to the Small LECs, the Office of Ratepayer Advocates' (ORA) position that the Commission should both maintain the waterfall schedule and prohibit companies from filing GRCs to preserve their current funding levels is contrary to the intent of the waterfall, which vests in companies the right to file for rate review in order to avoid a loss in CHCF-A funding. ORA's proposal also violates the provision of D.00-09-072, cited above.

ORA asserts that whatever schedule is adopted for GRCs, the waterfall should not be extended beyond 2001. If the waterfall is to be extended, then ORA recommends that the Commission order all GRCs filed in 2001. While ORA can sympathize with the burden that processing 13 GRCs will place on Commission staff, ORA cannot agree that California ratepayers should have to pay for the delay. ORA suggests that if the Commission does divide the GRC filings over a two-year period, the Commission should order the small LECs earning the lower rates of return to file their GRCs first. In that way, there is less risk that ratepayers will be made to finance a company's over-earnings.

In its Reply Comments, ORA disputes the Small LECs' assertion that there is no need to order the Small LECs to file GRCs. ORA asserts there is a need to require the Small LECs to file GRCs because GRCs ensure that the small companies are not earning over their authorized rates of return at the expense of California consumers.