1999 Adjustments

Summary of Adopted Errors to Net Operating Income and Rate Base

Pacific Bell Intrastate Regulated Operations

Phase 2B

1999

Joint Exhibit

Line

Pacific Bell

Non-Reg (Below the

Interstate

Intrastate Reg Before

Income

Intrastate Regulated

Index No.

Number

Adopted Adjustments to Net Operating Income

Total Co.

Line )

Separations

Tax

Tax

After Tax

Phase 2B Net Operating Income

39

1.

SBC Ops FAS 106 Merger Conforming Expense

4,062,029

502,081

764,182

2,795,766

(1,139,163)

1,656,603

40

2.

AMDOC Awards SBC Operations

615,307

68,515

120,399

426,393

(173,738)

252,655

41

3.

Excess Executive Compensation SBC Operations

1,532,717

189,449

288,347

1,054,921

(429,838)

625,083

42

4.

SBC Ops Sec. Alloc of Parent Mgt Fees

663,868

82,057

124,892

456,919

(186,176)

270,743

43

5.

SBC Ops Call Ctr Depreciation, Merger Implementation Exp.

-

-

-

-

-

-

44

6.

SBC Svcs "Excess" Executive Comp Expense

310,190

20,703

62,363

227,124

(92,544)

134,580

45

7.

SBC Svcs, CFL, TRI Sec. Alloc. of Parent Mgt Fees

497,121

31,518

100,409

365,194

(148,802)

216,392

46

8.

Parent "Excess" Executive Compensation Expense

15,652,558

411,181

3,276,084

11,965,293

(4,875,378)

7,089,915

47

9.

Parent Political and Legislative Influence Expense

8,996,671

-

1,931,234

7,065,437

(2,878,883)

4,186,554

48

10.

Parent Legal Expense

483,922

28,214

97,823

357,885

(145,824)

212,061

49

11.

Parent Public Relations & Corporate Sponsorship Expense

20,210,683

714,200

4,614,691

14,881,792

(6,063,735)

8,818,057

50

12.

Parent Corporate Development Expense

8,007,868

473,146

1,617,643

5,917,079

(2,410,973)

3,506,106

51

13.

Parent Strategic Planning Expense

902,785

20,982

190,182

691,621

(281,808)

409,813

52

14.

Parent Contributions, Memberships, Foundation Expense

(6,557,997)

34,601

(1,415,174)

(5,177,424)

2,109,593

(3,067,831)

53

15.

Parent Out of Period Expense

-

-

-

-

-

-

54

16.

Parent Merger Conforming Expense

1,029,118

52,190

209,802

767,126

(312,573)

454,553

55

17.

Parent Impact of Adjustments on Billings to PBD

7,516,450

-

-

7,516,450

(3,062,653)

4,453,797

56

18.

MSI USA "Excess" Executive Compensation Billed Directly

4,558,803

251,564

928,959

3,378,280

(1,376,514)

2,001,766

57

19.

Parent PB Employee Transfer Fees Billed Back to Pac Bell

-

-

-

-

-

-

59

20.

Nevada Bell Net Directory Revenue

(16,179,000)

-

-

(16,179,000)

4,926,000

(11,253,000)

62

24.

Customer Service Non-Productive Salary Allocations

(10,327,231)

-

(2,203,666)

(8,123,565)

3,310,028

(4,813,537)

64

26.

Non-regulated Tracking Code Direct Assignment Errors

7,284,797

-

1,820,400

5,464,397

(2,226,523)

3,237,874

65

27.

National-Local Strategy Implementation

8,575,331

634,181

1,704,655

6,236,495

(2,541,122)

3,695,373

66

28.

1997 Corporate Sponsorship Costs

-

-

-

-

-

-

67

29.

Customer Premise Equipment Costs

7,803,311

-

1,950,828

5,852,483

(2,384,653)

3,467,830

1

30.

Unsupported Contingent Liabilities - Revenues

-

-

-

-

-

-

2

31.

Bellcore Dividends

-

-

-

-

-

-

3

32.

Uncollectible Revenues - RCRMS (PacBell reports flows thru)

-

-

-

-

-

-

4

33.

Gain on Sale of Bellcore

-

-

-

-

-

-

5

34.

Local Number Portability Costs

38,861,608

1,215,608

-

37,646,000

(15,339,239)

22,306,761

7

36.

Merger Savings

4,200,000

-

-

4,200,000

(1,711,332)

2,488,668

8

37.

Advanced Communications Network

5,363,702

465,820

1,140,353

3,757,529

(1,531,043)

2,226,486

10

39.

Unsupported Contingent Liabilities - Operating Expense

13,968,240

2,203,104

11,765,136

(4,793,822)

6,971,314

12

41.

ISP-Bound Traffic Separations

-

-

-

-

-

-

13

42.

Uncollectible Settlements - RCRMS

-

-

-

-

16

43.

SFAS 112

-

-

-

-

-

-

18

45.

SAVR Delayed Retirements

-

-

-

-

-

-

20

47.

Equal Access IEMR Ratemaking Adjustment

-

-

-

-

-

-

22

48.

Ameritech Income Tax Misclass

-

-

-

-

-

23

49.

Income Tax Normalization - Phase 2B Issues

(91,664,000)

-

-

(91,664,000)

-

(91,664,000)

24

50.

Excess Deferred Income Tax

-

-

-

-

25

51.

Sales and Use Tax Accrual

-

-

-

-

26

52.

Employment Tax Error

-

-

-

68

53.

PIU Accrual

-

-

-

-

-

-

69

54.

USOAR Turnaround Accrual

-

-

-

-

-

-

70b

55.

LNP Depreciation

4,246,999

-

-

4,246,999

(1,730,482)

2,516,517

57.

Total Phase 2B Net Operating Income

40,615,850

7,399,114

17,324,406

15,892,330

(45,491,197)

(29,598,868)

Phase 2B Rate Base

29

58.

SFAS 112 Liability

30

59.

Vacation Liability

31

60.

SFAS 106 Accrued Liability

32

61.

Accrued Contingent Liability

27

62.

Cash Working Capital

(91,103,000)

28

63.

Prepaid Directory Expense

-

35

64.

Restructure Reserve

(28,975,159)

36

65.

Accumulated Reserve for Depreciation

4,021,615

37

66.

Accumulated Deferred Income Tax

(43,318,848)

38

67.

Excess Deferred Income Tax

70a

68.

LNP Plant

(42,836,992)

72

69.

PBOP Pre-Funding Plant Adj.

70.

Total Phase 2B Rate Base

(202,212,384)


Summary of Adopted Errors to Net Operating Income and Rate Base
Pacific Bell Intrastate Regulated Operations
Phase 2B
1999
Joint Exhibit	Line		Pacific Bell	Non-Reg (Below the	Interstate	Intrastate Reg Before	Income	Intrastate Regulated
Index No.	Number	Adopted Adjustments to Net Operating Income	Total Co.	Line )	Separations	Tax	Tax	After Tax

		Phase 2B Net Operating Income

39	1.	SBC Ops FAS 106 Merger Conforming Expense	4,062,029	502,081	764,182	2,795,766	(1,139,163)	1,656,603
40	2.	AMDOC Awards SBC Operations	615,307	68,515	120,399	426,393	(173,738)	252,655
41	3.	Excess Executive Compensation SBC Operations	1,532,717	189,449	288,347	1,054,921	(429,838)	625,083
42	4.	SBC Ops Sec. Alloc of Parent Mgt Fees	663,868	82,057	124,892	456,919	(186,176)	270,743
43	5.	SBC Ops Call Ctr Depreciation, Merger Implementation Exp.	-	-	-	-	-	-
44	6.	SBC Svcs "Excess" Executive Comp Expense	310,190	20,703	62,363	227,124	(92,544)	134,580
45	7.	SBC Svcs, CFL, TRI Sec. Alloc. of Parent Mgt Fees	497,121	31,518	100,409	365,194	(148,802)	216,392
46	8.	Parent "Excess" Executive Compensation Expense	15,652,558	411,181	3,276,084	11,965,293	(4,875,378)	7,089,915
47	9.	Parent Political and Legislative Influence Expense	8,996,671	-	1,931,234	7,065,437	(2,878,883)	4,186,554
48	10.	Parent Legal Expense	483,922	28,214	97,823	357,885	(145,824)	212,061
49	11.	Parent Public Relations & Corporate Sponsorship Expense	20,210,683	714,200	4,614,691	14,881,792	(6,063,735)	8,818,057
50	12.	Parent Corporate Development Expense	8,007,868	473,146	1,617,643	5,917,079	(2,410,973)	3,506,106
51	13.	Parent Strategic Planning Expense	902,785	20,982	190,182	691,621	(281,808)	409,813
52	14.	Parent Contributions, Memberships, Foundation Expense	(6,557,997)	34,601	(1,415,174)	(5,177,424)	2,109,593	(3,067,831)
53	15.	Parent Out of Period Expense	-	-	-	-	-	-
54	16.	Parent Merger Conforming Expense	1,029,118	52,190	209,802	767,126	(312,573)	454,553
55	17.	Parent Impact of Adjustments on Billings to PBD	7,516,450	-	-	7,516,450	(3,062,653)	4,453,797
56	18.	MSI USA "Excess" Executive Compensation Billed Directly	4,558,803	251,564	928,959	3,378,280	(1,376,514)	2,001,766
57	19.	Parent PB Employee Transfer Fees Billed Back to Pac Bell	-	-	-	-	-	-
59	20.	Nevada Bell Net Directory Revenue	(16,179,000)	-	-	(16,179,000)	4,926,000	(11,253,000)
62	24.	Customer Service Non-Productive Salary Allocations	(10,327,231)	-	(2,203,666)	(8,123,565)	3,310,028	(4,813,537)
64	26.	Non-regulated Tracking Code Direct Assignment Errors	7,284,797	-	1,820,400	5,464,397	(2,226,523)	3,237,874
65	27.	National-Local Strategy Implementation	8,575,331	634,181	1,704,655	6,236,495	(2,541,122)	3,695,373
66	28.	1997 Corporate Sponsorship Costs	-	-	-	-	-	-
67	29.	Customer Premise Equipment Costs	7,803,311	-	1,950,828	5,852,483	(2,384,653)	3,467,830
1	30.	Unsupported Contingent Liabilities - Revenues	-	-	-	-	-	-
2	31.	Bellcore Dividends	-	-	-	-	-	-
3	32.	Uncollectible Revenues - RCRMS (PacBell reports flows thru)	-	-	-	-	-	-
4	33.	Gain on Sale of Bellcore	-	-	-	-	-	-
5	34.	Local Number Portability Costs	38,861,608	1,215,608	-	37,646,000	(15,339,239)	22,306,761
7	36.	Merger Savings	4,200,000	-	-	4,200,000	(1,711,332)	2,488,668
8	37.	Advanced Communications Network	5,363,702	465,820	1,140,353	3,757,529	(1,531,043)	2,226,486
10	39.	Unsupported Contingent Liabilities - Operating Expense	13,968,240	2,203,104		11,765,136	(4,793,822)	6,971,314
12	41.	ISP-Bound Traffic Separations	-	-	-	-	-	-
13	42.	Uncollectible Settlements - RCRMS		-		-	-	-
16	43.	SFAS 112	-	-	-	-	-	-
18	45.	SAVR Delayed Retirements	-	-	-	-	-	-
20	47.	Equal Access IEMR Ratemaking Adjustment	-	-	-	-	-	-
22	48.	Ameritech Income Tax Misclass		-	-	-	-	-
23	49.	Income Tax Normalization - Phase 2B Issues	(91,664,000)	-	-	(91,664,000)	-	(91,664,000)
24	50.	Excess Deferred Income Tax		-		-	-	-
25	51.	Sales and Use Tax Accrual		-		-	-	-
26	52.	Employment Tax Error				-	-	-
68	53.	PIU Accrual	-	-	-	-	-	-
69	54.	USOAR Turnaround Accrual	-	-	-	-	-	-
70b	55.	LNP Depreciation	4,246,999	-	-	4,246,999	(1,730,482)	2,516,517

	57.	Total Phase 2B Net Operating Income	40,615,850	7,399,114	17,324,406	15,892,330	(45,491,197)	(29,598,868)

		Phase 2B Rate Base

29	58.	SFAS 112 Liability
30	59.	Vacation Liability
31	60.	SFAS 106 Accrued Liability
32	61.	Accrued Contingent Liability
27	62.	Cash Working Capital						(91,103,000)
28	63.	Prepaid Directory Expense						-
35	64.	Restructure Reserve						(28,975,159)
36	65.	Accumulated Reserve for Depreciation						4,021,615
37	66.	Accumulated Deferred Income Tax						(43,318,848)
38	67.	Excess Deferred Income Tax
70a	68.	LNP Plant						(42,836,992)
72	69.	PBOP Pre-Funding Plant Adj.

	70.	Total Phase 2B Rate Base						(202,212,384)