D. Discussion

It is not our intention to adopt a rate case plan for Small LECs in this proceeding. What we do intend is to set up a schedule which companies should follow, if they intend to file for GRCs. In D.01-02-018 we determined that the replacement funding for the 13 small companies will be subject to the CHCF-A's waterfall provision. Since the Small LECs assert that the amounts they received from Pacific pursuant to the Settlement Transition Agreements (STAs) Pacific negotiated with each company represents from 30 to 80% of each company's intrastate revenue requirement², we anticipate that the small companies will choose to file for GRCs in a timely fashion so as not to be subject to the waterfall provision in 2002. Given that fact, there is a strong likelihood that all 13 Small LECs would file GRCs by the end of 2001 in order to prevent their CHCF-A Fund draw from being reduced. The near-simultaneous filing of 13 GRCs presents a significant burden on Commission resources as well as on the parties.

ORA disputes our prior decision to extend the waterfall as a predicate for setting a two-year schedule for filing rate cases. We remind ORA that that issue was decided in D.00-09-072 and will not be addressed further here. We must balance the potential workload considerations of Commission staff and the parties against the cost to ratepayers of allowing some of the Small LECs to extend the waterfall for an additional year. We find that scheduling the GRCs over two years would best balance the Commission's workload.

ORA suggests that, if GRCs are scheduled over two years, the companies with the lowest rate of return should be required to file their GRCs first. However, the rate-of-return data which ORA presented in this proceeding was hotly contested by the Small LECs, and we did not have an opportunity to resolve those differences in the proceeding so we would prefer not to rely on that untested rate-of-return data to make our determination. Instead, we will use the dollar amounts of the STA payments from Pacific. In order to minimize the amount of draw from the CHCF-A, we have selected the six companies receiving the highest STA payments from Pacific to be considered first for GRCs so we will make those six Small LECs subject to the waterfall provision in 2002. The Small LECs each received a minimum of $2 million under the terms of the STAs they negotiated with Pacific. The six Small LECs include the following companies: Evans Telephone Company (Evans), Happy Valley Telephone Company (Happy Valley), The Ponderosa Telephone Co. (Ponderosa), Sierra Telephone Company, Inc. (Sierra), The Siskiyou Telephone Company (Siskiyou) and The Volcano Telephone Company (Volcano). We reiterate that we are not requiring these six Small LECs to file GRCs in 2001. Rather, we are setting the waterfall in motion which means that if the companies decide not to file for rate cases in 2001, their 2002 draw from the CHCF-A will be reduced by 20%, as a result of the operation of the waterfall provision. Each company will evaluate the operation of the waterfall and its financial situation in determining when it will file a GRC.

We will extend the 100% waterfall provision for one additional year, through 2002, for the following Small LECs: Calaveras, Cal-Ore, Ducor, Foresthill, Hornitos, Kerman, and Pinnacles. Again, these remaining seven Small LECs will not be required to file GRCs in 2002, but if the companies decide not to file rate cases in 2002, their 2003 draw from the CHCF-A will be reduced by 20% as a result of the CHCF-A waterfall provision. By sequencing the GRCs over a two-year period, we have balanced the Commission's workload. Also, it is most equitable to California's ratepayers to encourage those Small LECs with the highest STA payments from Pacific (and presumably the highest CHCF-A draws) to file for GRCs in 2001.