X. Assignment of Proceeding
Michael R. Peevey is the Assigned Commissioner and Jeffrey P. O'Donnell is the assigned ALJ in this proceeding.
1. Citizens has not been audited by the Commission for 10 years.
2. The future NRF review will address the regulatory framework under which Citizens will operate.
3. The services Citizens' customers will receive, and the rates, charges and rules under which service will be provided, will be directly affected by the results of the future NRF review.
4. An important element of the future NRF review will be an assessment of Citizens' compliance with the Commission's requirements, including sharing.
5. An assessment of Citizens' compliance with the Commission's requirements cannot be performed without an audit.
6. ORA is the only interested party in this proceeding, and may possibly be the only interested party in the future NRF review.
7. ORA does not have the personnel and resources to perform the audit, and Citizens has offered no viable alternative to ORA's proposal.
8. This decision relates to the financial information the Commission will use in a future rate proceeding, and addresses the funding of an audit to be undertaken by Commission staff.
9. The amount spent in connection with A. 99-03-025, the last NRF review for Roseville, was roughly $300,000.
10. The Legislature included in the Commission's appropriated budget amounts to cover items that would be reimbursed.
11. The settlement adopts revisions to the reporting requirements that clarify the means and frequency of providing the reports, and consolidates some reports.
12. The settlement does not reduce the amount of information reported.
13. The settlement reserves for ORA the right to revisit the reporting requirements in the future NRF review.
14. The settlement is proposed by all parties to the proceeding.
15. There is strong public policy favoring settlements to avoid costly and protracted litigation.
16. The settlement reduces Citizens' administrative costs, thereby making it more efficient, but does not reduce the information received by the Commission.
17. ORA represents the interests of all customers, and Citizens represents its shareholders.
18. Nothing in the settlement contravenes statutory provisions, or prior Commission decisions.
19. The settlement sufficiently states the reporting requirements to enable the Commission to fulfill its future regulatory obligations with respect to the parties and their interests.
20. There is no statute that prohibits the Commission from requiring Citizens to reimburse it for the costs of ORA's consultants.
21. The Commission has plenary powers and broad authority to ensure that its regulatory duties and obligations are carried out and enforced.
22. The future NRF review will be a significant proceeding.
23. The Commission must enforce the provisions of the Public Utilities Act, including §451, which requires utility rates, charges and rules to be just and reasonable.
24. Section 451 requires utilities to maintain adequate, efficient, just and reasonable service to their customers.
25. Pursuant to § 454, if the Commission adopts rate changes it must determine that those changes are justified.
26. In order to assure Citizens' compliance with §451, and the Commission's own compliance with the statutory scheme, the future NRF review proceeding must develop an adequate record on which to base its decision.
27. Section 314.5 requires the Commission to audit Citizens' books and records for regulatory purposes at least every three years.
28. ORA is an arm of the Commission, and its staff has the authority to examine and audit utility records.
29. ORA's review of Citizens' financial condition and its participation in the future NRF review will be necessary to comply with §314.5, and for the development of a record sufficient to support the exercise of the Commission's ratemaking authority.
30. An audit is necessary, and ORA is the appropriate entity to conduct it.
31. In order for the Commission to have an adequate record in the future NRF review, it is necessary to provide ORA with sufficient resources to hire consultants to do the audit.
32. The Commission is required by § 309.5(c) to provide ORA with sufficient resources and personnel to "ensure that customer and subscriber interests are fairly represented in all significant proceedings."
33. The future NRF review will be a significant proceeding, and it is necessary for ORA to conduct an audit to represent ratepayer interests adequately, and for the Commission to have a sufficient record on which to base its decision.
34. It is necessary to provide ORA with sufficient resources to hire consultants to do the audit in order to comply with § 309.5(c).
35. It is by no means novel or unusual for the Commission to require a utility to reimburse it for the costs of consultants to do an audit.
36. Section 701 provides that the Commission "may do all things, whether specifically designated in this part or in addition thereto, which are necessary and convenient in the exercise of such power and jurisdiction."
37. The Commission should use its authority to ensure that its regulatory duties and obligations are carried out and enforced.
38. It is well established that the Commission's powers are not limited to those expressly conferred upon it.
39. Section 701 grants the Commission authority to "do all things", including those "in addition" to those set forth in the Public utilities Act, so long as it does not contravene an express legislative directive or take action that is not cognate or germane to utilities regulation.
40. ORA is not an outside party; it is an arm of the Commission.
41. Specific legislation addressing the way the Commission conducts certain public purpose programs, or reviews construction costs or environmental impacts, does not define the scope of the Commission's authority in this proceeding.
42. Citizens should be required to reimburse the Commission for the costs of consultants to be hired by ORA to perform the audit.
43. Citizens should be allowed to recover the amount it reimburses the Commission. The specific means for doing so should be determined in the future NRF review.
44. Since periodic audits are required by § 314.5, Citizens' costs related to the audit are reasonably foreseeable, routine business expenses that are already covered in rates.
45. Citizens should not be allowed separate recovery of its internal costs related to the audit.
46. In order for the audit to begin as soon as possible, this decision should be effective immediately.
47. Consistent with the requirements of § 1701.5 (effective January 1, 2004), the Commission must complete ratemaking proceedings within 18 months.
48. This application should be closed at this time, and Citizens should be required to file its future NRF review no later than 90 days after a final decision in R.01-09-001 and I.01-09-002.
49. ORA should be required to file a report on the results of its audit in the future NRF review.
50. Consistent with §§ 309.5, 314, 582, 583, 584, and 797 (among others), as well as D.01-08-062, Citizens should fully cooperate with ORA and its consultants as they conduct the audit.
51. Citizens is obligated to respond to ORA's data requests and those of its consultants.
52. Citizens cannot refuse to respond to ORA's or its consultants' requests for information simply because Citizens considers these outside the scope of the audit.
53. Pursuant to § 314, Citizens may not refuse to allow the Commission's staff or its consultants to inspect Citizens' records.
54. Pursuant to § 309.5(e), any objections to a data request or request for information should be "decided in writing by the assigned commissioner or by the president of the commission if there is no assigned commissioner." With no open proceeding, these matters should be decided by the President's office.
55. The audit should address compliance with the Commission's rules, orders, decisions, and policies.
56. The audit should include, but not be limited to, affiliate transactions, cost allocations, employee pensions and benefits, and income taxes.
57. The audit should focus on areas that pose the most risk to ratepayers.
58. The audit should not include items beyond traditional audit parameters such as rate comparisons, analysis of benefits to customers, service quality, and management structuring.
59. The audit period should be three years ended December 31, 2003. However, ORA should be allowed to address records and information, related to the period subsequent to December 31, 2003, to the extent they are relevant.
60. The cap on ORA's consultant costs should be $300,000.
61. ORA should be required to submit to the Executive Director a detailed audit plan that conforms to the requirements set out in this decision, not less than 90 days after the effective date of this decision.
62. The Executive Director should review the audit plan for consistency with this order, and approve it if it complies. If it does not comply, the Executive Director should reject the plan and require ORA to submit a revised audit plan.
63. Section 431 sets up a scheme under which the Commission's budget consists of items paid for from the "annual fee" and items "to be paid from special accounts or funds pursuant to § 402, reimbursement, federal funds, and any other revenues, and the amount of unencumbered funds from the preceding year."
64. In order that the audit begin as soon as possible, this decision should be effective immediately.
65. Citizens should be ordered to file its future NRF review no later than 90 days after a final decision in R.01-09-001 and I.01-09-002.
66. Rule 51.1(e) provides that the Commission will not approve settlements or stipulations, whether contested or not, unless they are reasonable in light of the whole record, consistent with law, and in the public interest.
67. The settlement commands the unanimous sponsorship of all active parties to the proceeding.
68. The sponsoring parties are fairly representative of the affected interests.
69. No term of the settlement contravenes statutory provisions or prior Commission decisions.
70. The settlement conveys to the Commission sufficient information to permit it to discharge its future regulatory obligations with respect to the parties and their interests.
71. The settlement is reasonable in light of the whole record, consistent with law, in the public interest, and satisfies the additional criteria applicable to all-party settlements.
72. The settlement should be adopted.
IT IS ORDERED that:
1. The Commission's Office of Ratepayer Advocates (ORA) shall perform an audit of Citizens Telecommunications Company of California (Citizens).
2. Citizens shall reimburse the Commission for the costs of the consultants to be hired by ORA to perform the audit, with those reimbursements to be accounted for as part of the reimbursable portion of the Commission's budget.
3. Citizens shall be allowed to recover the amount it reimburses the Commission provided it reasonably cooperates with the audit. The specific means for recovering the authorized amount will be determined in the next New Regulatory Framework (NRF) review proceeding.
4. Citizens shall cooperate with ORA and its consultants in their performance of the audit.
5. ORA's audit shall address compliance with the Commission's rules, orders, decisions, and policies.
6. The audit period shall be three years ended December 31, 2003. However, ORA may address records and information, related to the period subsequent to December 31, 2003, to the extent they are relevant.
7. The cap on ORA's consultant costs shall be $300,000.
8. ORA shall to submit to the Executive Director a detailed audit plan that conforms to the requirements set out in this decision, not less than 90 days after the effective date of this decision. The Executive Director shall review the audit plan for consistency with this order, and approve it if it complies. If it does not comply, the Executive Director shall reject the plan and require ORA to submit a revised audit plan.
9. Citizens shall file an application for a review of its NRF no later than 90 days after a final decision in Rulemaking 01-09-001 and Investigation 01-09-002, or as specified in a further order of the Commission, and ORA shall file a report on the results of the audit therein.
73. The all-party settlement, included as Attachment A to this decision, is adopted.
74. This proceeding is closed.
This order is effective today.
Dated _____________________, at San Francisco, California.
Attachment A
BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORNIA
In the Matter of the Application of Citizens )
Telecommunications Company of California Inc. )
(U-1024-C) dba Frontier Communications of ) A.03-04-002
California to review its New Regulatory Framework )
_________________________________________________ )
SETTLEMENT AGREEMENT
This Settlement Agreement is entered into as of July 29, 2003, by and among Citizens Telecommunications Company of California Inc. d/b/a Frontier Communications of California ("Frontier") and the Office of Ratepayer Advocates ("ORA").
RECITALS
WHEREAS, on April 1, 2003, Frontier filed its application for triennial review of its new regulatory framework ("NRF"); and
WHEREAS, in its NRF review application, Frontier sought, among other things, modification of certain NRF monitoring report requirements; and
WHEREAS, Frontier and ORA have arrived at an interim agreement regarding the proposed modifications of Frontier's NRF monitoring report requirements which is reasonable in light of the whole record, is consistent with the law of the State of California, and is in the public interest.
AGREEMENT
NOW, THEREFORE, based upon the mutual agreement reflected in this Settlement Agreement, Frontier and ORA agree to interim resolution of the NRF monitoring report portion of Frontier's NRF review application as follows:
1. Modification of Monitoring Reports. Tracking the NRF monitoring reports specified for modification by Frontier in Attachment A to its NRF review application, the parties agree to the following interim disposition of those reports.
A. NRF Monitoring Report Code C.A. 02-02 (Notification of Major Service Interruption): Upon occurrence of a major service interruption, Frontier shall provide the C.A. 02-02 report in the form currently approved by the Telecommunications Division by email to a Telecommunications Division designee and an ORA designee.
B. NRF Monitoring Report Code C.A. 02-03 (Major Service Interruption Summary): For each calendar quarter, Frontier shall submit the C.A. 02-03 report in the form currently approved by the Telecommunications Division to the Telecommunications Division and ORA.
C. NRF Monitoring Report Code C.A. 02-05 (Customer Surveys): Frontier shall provide the Telecommunications Division and ORA notice of the results of any customer survey with the group of quarterly NRF monitoring reports covering the month in which the survey results are acquired.
D. NRF Monitoring Report Code C.A. XX-01 (Customer Information Notices): The parties agree that there will be no change to this reporting requirement.
E. NRF Monitoring Report Code C.A. XX-08 (ULTS Claim Statement): The parties agree that there will be no change to this reporting requirement.
F. NRF Monitoring Report Codes C.D. 01-00 (G.O. 65-A Operating Report), C.D. 04-00 (Separated Results of Operations) and C.D. 04-01 (Separated Results of Operations - Adjusted): The parties agree that there will be no change to these reporting requirements.
G. NRF Monitoring Report Code C.D. XX-04 (Interest During Construction): Frontier shall provide the Telecommunications Division and ORA notice of the change of the applicable interest rate with the group of quarterly NRF monitoring reports covering the month in which the change in interest rate occurs.
H. NRF Monitoring Report Code C.D. XX-10 (DEAF Trust - Monthly Expense and Annual Budget): The parties agree that there will be no change to this reporting requirement.
I. NRF Monitoring Report Code C.F. 09-00 (Informal Complaints from Competitors): This report shall be eliminated. However, Frontier shall include information previously required by this reporting requirement in its quarterly report of informal service complaints (NRF Monitoring Report Code C.A. 02-00).
2. No Waiver. The parties agree that ORA's consent to modification of reporting requirements in this Agreement shall not constitute a waiver of ORA's authority to recommend reinstatement of such reporting requirements or the addition of new reporting requirements. The fact that ORA has agreed to modification of NRF monitoring report requirements in this Agreement shall not be used as evidence against any subsequent ORA recommendations regarding NRF monitoring reports.
OFFICE OF RATEPAYER ADVOCATES
Dated:_____________ By: _____________________________________
Darwin E. Farrar, Staff Attorney for
the Office of Ratepayer Advocates
CITIZENS TELECOMMUNICATIONS COMPANY OF CALIFORNIA INC. d/b/a
FRONTIER COMMUNICATIONS OF CALIFORNIA
Dated: _____________ By: _____________________________________
Sean P. Beatty
Counsel to Citizens Telecommunications Company of California Inc. d/b/a Frontier Communications of California
(END OF ATTACHMENT A)
