VI. Comments of Draft Decision
The draft decision of the ALJ in this matter was mailed to the parties in accordance with Pub. Util. Code § 311(g)(1) and Rule 77.7 of the Rules of Practice and Procedure. Comments were filed on and reply comments on __________________.
1. Pacific has been authorized to seek recovery of prudently incurred local competition implementation costs as prescribed by D.96-03-020, D.98-11-066, and D.99-07-048.
2. As its case-in-chief, Pacific presented documentation to support recovery of $175 million in implementation costs incurred over three years (1996-1998), reflecting the cost tracking categories as summarized and described in Appendix B of this order.
3. The cost schedule of Pacific's implementation costs was audited by Price Waterhouse Cooper LLP, for each of the three years. The auditor's report concluded that the reported costs fairly represented the costs accumulated in the local competition tracking codes.
4. The active parties in this proceeding undertook extensive discovery and conducted depositions after receipt of Pacific's case in chief for its implementation cost recovery filed on December 20, 1999.
5. The active parties in the implementation cost proceedings subsequently entered into settlement discussions with Pacific regarding its case-in-chief and signed a Settlement Agreement on May 18, 2000, as set forth in Appendix A hereto.
6. The Settlement would limit Pacific's recovery amount for local competition implementation costs to $87.5 million, including principal and interest, to be recovered over two years beginning on January 1, 2001, through Pacific's Rule 33 Billing Surcharge applicable to exchange, toll, and access billings.
7. Based upon the most recently approved billing base, the Rule 33 surcharge to recover the settlement amount would be 0.737%, although the actual surcharge amount will depend on the billing base approved for the years 2001 and 2002.
8. The surcredits that will be available to Pacific during 2001 and 2002 are expected to exceed the amount of the surcharge for recovery of the $87.5 million implementation costs, resulting in no net increase in the customer surcharge.
9. The Settlement recovery amount of $87.5 million would cover any amounts incurred during 1999 and subsequent years as a result of CPUC or FCC orders issued before April 18, 2000, except for the specific categories of excluded costs identified in Paragraphs 10 and 11 of the Settlement.
10. The six parties sponsoring the Settlement include all of the parties that have been actively involved in reviewing and testing Pacific's December 20, 1999 case-in-chief filing.
11. The sponsoring parties, among whom represents Pacific's investors, customers, and competitors, fairly reflect the range of affected interests at stake in granting Pacific authority to recover local competition implementation costs.
12. The Settlement's recovery amount is less than half of the amount for which Pacific sought to justify recovery in its case-in-chief, but is more than the amount that opposing sponsoring parties would have proposed if the case was to be litigated.
13. Parties representing consumers, ORA and TURN, were opposed to any implementation cost recovery by Pacific prior to the Settlement, but entered into the Settlement in view of the Commission's previously adopted policy allowing for some cost recovery to be considered.
14. The sponsoring parties representing the interests of long distance carriers disagreed in principle that costs of local competition should be borne by long distance carriers, but compromised on this position in view of the overall favorable terms of the Settlement.
15. The adoption of the settlement will avoid the risk, expense, and complexity of further litigation of Pacific's implementation cost.
1. The Settlement Agreement conforms with Rule 51 of the Commission's Rules of Practice and Procedure, and is reasonable in light of the whole record, consistent with law, and in the public interest.
2. The Settlement Agreement meets the criteria outlined by the Commission for evaluation as an "all-party" settlement as prescribed in D.92-12-019.
3. The Settlement Agreement, as reproduced in Appendix A should be adopted.
4. Pacific should be authorized to recover $87.5 million per year in local competition implementation costs, including interest, over a two-year period beginning January 1, 2001, through Pacific's Rule 33 billing surcharge applied to exchange, toll, and access services in accordance with the terms outlined in the Settlement Agreement.
5. No provision of the Settlement Agreement is precedential for purposes of any future or concurrent proceeding.
IT IS ORDERED that:
1. The Settlement Agreement, set forth in Appendix A herein, is hereby approved and adopted.
2. Pacific Bell (Pacific) is authorized to include an implementation cost surcharge in its Annual Price Cap filing beginning January 1, 2001 to recover $43.75 million per year for a two year period to be applied to exchange, toll, and access services pursuant to Rule 33-Billing Surcharges of Pacific's tariffs, specifically, Schedule Cal. P.U.C. No. A2.1.33.
3. The surcharge for the approved recovery amount shall be calculated as a percentage using the billing bases approved in Pacific's 2001 and 2002 Annual Price Cap filings, respectively.
This order is effective today.
Dated , at San Francisco, California.
APPENDIX A
APPENDIX B
Description of Pacific's Implementation Cost Categories
RESALE Costs incurred to facilitate leasing of Pacific Bell's circuits and the provision of other Pacific Bell services to carriers that in turn, resell them to individual users.
INTERCONNECTION Costs incurred for the training and development of personnel associated with the setup of the Local Interconnection Service Center and Interconnection Service Center to facilitate the provisioning of trunks and/or local interconnection projects.
DATA EXCHANGE Costs incurred to facilitate the two-way exchange of billing and usage records between Pacific Bell and Competing Local Exchange Carriers (CLC's).
DIRECTORY NUMBER CALL FORWARDING (DNCF) Costs incurred to facilitate remote call forwarding of telephone numbers to CLC switches and related transport requirements on an interim basis. This feature provide end-users the ability to retain their telephone number when changing local service providers.
LOCAL INTERCONNECTION SERVICE ARRANGEMENT (LISA) Costs incurred to facilitate trunk-switched network interconnection between a CLC network point of interface and a Pacific Bell access tandem or end-office.
OPERATOR SUPPORT SERVICES Costs incurred to provide operator-assisted dialing, directory assistance, and directory listings for CLC customers and content for alternate directory assistance providers.
E911 Costs incurred to provide the capability for CLC's to provide their customers with access to E911 service.
SWITCH UNBUNDLING Costs incurred to facilitate the development of local switching network elements. There are three types of switch unbundling: basic routing, route "0" and "411" to CLC with shared transport and complex custom routing.
Port Costs incurred to provide local switching without distribution facilities.
LINK Costs incurred to provide loop transport between an end-user minimum point of entry and Pacific Bell's point of interconnection at the central office.
BILL RECONCILIATION UNIT Costs incurred to permit the identification of the different billing sources that CLC's may receive from Pacific Bell and development of the processes needed to respond to requests from CLC's for assistance in reconciling their various bills.
CLC INTERFACE/CLC ACCESS INFORMATION/CLC USAGE RECONCILIATION Costs incurred for the coordination of access to service negotiation ordering and provisioning information including gateway to PREMIS information system for telephone number assignment.
RATE CENTER INCONSISTENCIES Costs incurred to provide the ability to appropriately rate and route calls to numbers in CLC prefixes assigned outside of the current approved Rate Area Boundary.
NEW ELEMENTS REQUIRED BY TELECOM ACT (Unbundling/OSS) Costs associated with specific projects that were developed and implemented as a direct result of the Telecom Act in support of the mandate for access to operational support systems and the unbundling of network elements.
NEW PROJECTS 1998 Costs associated with specific projects that were developed and implemented in 1998 due to local competition requirements. These projects include: SORD, UNE Program, CMRS Pooling, RATE Listings, BES Flowthrough 5.0 and UNE DL/DSR.
(END OF APPENDIX B)
