Discussion

We shall address both Pacific's motion and ORA's motion together since they both deal with the issue of LE factor recovery of PEP costs. We grant ORA's motion to deny these requests. We deny Pacific's and GTEC's requests for LE factor recovery of PEP costs. Pacific has failed to show that the PEP expenditures meet the criteria for LE factor recovery. We find the opposing parties' arguments persuasive as to why denial of LE factor recovery is appropriate. As stated in D.98-10-026, the LE factor is to be limited to those costs for which LE factor treatment is explicitly authorized in the underlying decision. In the case of the 310 NPA PEP, the underlying decision authorizing the program was D.98-12-081. Yet, in that decision, we did not authorize LE factor recovery for PEP costs. Thus, a key eligibility criterion for LE factor recovery has not been satisfied.

Our decision denying LE recovery is further influenced by subsequent developments relating to the suspension of the 310 NPA overlay. In particular, we note the subsequent negative public reaction to the 310 NPA overlay and to other overlay plans despite the intent of the PEP to prepare the public for an overlay. The negative reaction of the public was previously highlighted in D.99-09-067. While ratepayers would have to bear the burden of the PEP costs under Pacific's LE factor recovery proposal, ratepayers have not received any meaningful benefit from the PEP since the 310 NPA overlay was suspended.

Another development relevant to the disposition of Pacific's LE factor recovery request is the fact that all other previously approved overlay plans have since been suspended pursuant to D.99-12-051. ⁴ Because of this, there will be no need for Pacific to incur ongoing PEP expenditures for additional overlay plans, as argued in its filing. One of the assumptions underlying Pacific's LE factor request was that PEP expenditures would be ongoing with the cumulative financial effect becoming significant over time. With the suspension of the overlay plans, the extent of PEP expenditures are now limited to only funds already spent. There will be no cumulative growth of PEP costs for the foreseeable future. Based on the limited amounts already spent on all PEPs throughout the state to date, the magnitude of costs absorbed by Pacific and GTEC will be relatively limited. LE factor recovery is not justified given the limited duration that PEPs were in effect and the resulting limited financial sums involved.

We find Pacific's claim unpersuasive that the PEP costs meet the criteria established in D.94-06-011. We are not persuaded that the PEP costs are the result of an exogenous event. For the event to be exogenous, we would have to find that Pacific had no control over the events creating these costs. While it is true that the Commission mandated the PEP as a condition of an overlay and approved the PEP budget, Pacific had a significant degree of control over the events giving rise to the PEP costs. Pacific has been among the strongest proponents of the overlay form of NPA relief. Pacific has strongly argued in favor of overlays while acknowledging that a mandatory PEP would be needed in order to prepare the public for the new dialing procedure. Pacific also had a major role with respect to the development of the proposed PEP budget that was submitted to the Commission both for the 310 and the 408 NPA overlays. Although the final budget was subject to Commission approval, Pacific exercised a significant role in developing the budget that was ultimately proposed for PEP expenditures. The development of the proposed budget called for many discretionary decisions concerning the level of effort that would be involved, and how extensively information concerning the overlay would be disseminated among the public interest groups.

The PEP costs have not had a disproportionate impact on Pacific. In developing the allocation of PEP costs among industry participants for the 310 NPA, we specifically required that the cost obligation be directly proportional to the number of NXX codes each carrier holds within the overlay NPA. Thus, while the aggregate percentage of costs absorbed by Pacific may exceed that of other carriers, Pacific also has a greater share of NXX codes as compared to other carriers. Consequently, there is no disproportionate impact in relation to other carriers in terms of the cost per NXX code. Thus, Pacific fails to satisfy another requirement for LE factor recovery as stated in D.98-10-026:

"Moreover, in considering whether the costs will be allowed, we will consider whether the cost is unique to Pacific and/or GTE, or is a cost generally borne uniformly by all carriers in the industry."

Without going through each of the remaining prescribed criteria for the Z-factor, we conclude that Pacific's failure to satisfy those criteria discussed above is sufficient to justify a denial of its request for LE factor recovery of PEP costs for each of the NPAs for which such costs have been incurred. For similar reasons, we deny LE factor recovery for GTEC.