Public Service Commission, Administration

Section R746-360-8

Calculation of Fund Distributions in Rate-of-Return Incumbent Telephone Corporation Territories

Notice of Proposed Rule

(Amendment)

DAR File No.: 34001
Filed: 08/25/2010 11:51:24 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this amendment is to define the "weighted average rate of return on capital" to be used in the determination of support amounts to be paid to Incumbent Telephone Corporations from the universal service fund (USF).

Summary of the rule or change:

The amendment defines how the Public Service Commission (PSC) shall calculate the "weighted average rate of return on capital" to be used in determining the Incumbent's "total embedded costs". "Total embedded costs" is in turn used in determining the Incumbent's support amount from the USF.

State statutory or constitutional authorization for this rule:

• Section 54-8b-15
• 47 CFR Part 36

Anticipated cost or savings to:

the state budget:

The PSC has determined the current definition of "total embedded costs" used by individual Incumbents is not known by the Division of Public Utilities (the USF Administrator). Consequently, the PSC has no basis on which to calculate a change in demand on the USF or the likelihood of any resultant change in cost or savings.

local governments:

The PSC has determined the current definition of "total embedded costs" used by individual Incumbents is not known by the Division of Public Utilities (the USF Administrator). Consequently, the PSC has no basis on which to calculate a change in demand on the USF or the likelihood of any resultant change in cost or savings.

small businesses:

The change could increase revenues for small, independent telecom companies.

persons other than small businesses, businesses, or local governmental entities:

The PSC has determined the current definition of "total embedded costs" used by individual Incumbents is not known by the Division of Public Utilities (the USF Administrator). Consequently, the PSC has no basis on which to calculate a change in demand on the USF or the likelihood of any resultant change in cost or savings.

Compliance costs for affected persons:

The rule change only affects small, independent telecom companies (Incumbents). The new rule does not change their compliance costs. It simply clarifies the definition of a term used in determining their fund distribution.

Comments by the department head on the fiscal impact the rule may have on businesses:

The new definition could increase or decrease the USF support amount claimed by an Incumbent, depending on the Incumbent's present calculation method. The methods vary and are not known by the Division of Public Utilities. This change could potentially increase the level of demand upon the USF, perhaps significantly.

Ted Boyer, Commission Chairman

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Public Service Commission
Administration
160 E 300 S
SALT LAKE CITY, UT 84111-2316

Direct questions regarding this rule to:

• Sheri Bintz at the above address, by phone at 801-530-6714, by FAX at 801-530-6796, or by Internet E-mail at [email protected]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

10/15/2010

This rule may become effective on:

10/22/2010

Authorized by:

David Clark, Legal Counsel

R746. Public Service Commission, Administration.

R746-360. Universal Public Telecommunications Service Support Fund.

R746-360-8. Calculation of Fund Distributions in Rate-of-Return Incumbent Telephone Corporation Territories.

(A[.]) Determination of Support Amounts --

(1[.]) Incumbent telephone corporation - Monies from the fund will equal the numerical difference between the Incumbent telephone corporation's total embedded costs of providing public telecommunications services, for a designated support area, less the product of the Incumbent telephone corporation's Average Revenue Per Line, for the designated support area, times the Incumbent telephone corporation's active access lines in the designated support area. "Total embedded costs" shall include a weighted average rate of return on capital of the intrastate and interstate jurisdictions. For example, in the case of an Incumbent telephone corporation whose costs are allocated fifty percent to each jurisdiction and whose interstate return is 11.25 percent and whose intrastate return authorized by the Commission is 9 percent, the weighted average return on capital would be 10.125 percent.

(a) In order to determine the interstate return on capital to calculate the weighted average rate of return on capital for Incumbent telephone corporations, the Commission shall:

(i) use the prior year return reported by the National Exchange Carriers Association (NECA) to the Federal Communications Commission (FCC) on FCC Form 492 for Incumbent telephone corporations that do separations between intrastate and interstate jurisdictions under 47 CFR Part 36. In the event that the Incumbent local telephone corporation uses a future test period as provided in Utah Code Ann. Subsection54-4-4(3)(b)(i), the interstate return for these Incumbent telephone corporations shall be the average of the actual return for the prior three years as reported on FCC Form 492.

(ii) use NECA's most recent interstate allocation computation filed at the FCC under 47 CFR Part 69.606 and the actual interstate return on capital reported by NECA as described in R746-360-8 A.1.a.i. for average schedule Incumbent telephone corporations.

(iii) use the actual interstate return of an Incumbent telephone corporation's relevant tariff group reported to the FCC in its most recent September FCC Form 492A for Incumbent telephone corporations that are regulated on a price-cap basis in the interstate jurisdiction.

(2[.]) Telecommunications corporations other than Incumbent telephone corporations - Monies from the fund will equal the respective Incumbent telephone corporation's average access line support amount for the designated support area, determined by dividing the Incumbent telephone corporation's USF monies for the designated support area by the Incumbent telephone corporation's active access lines in the designated support area, times the eligible telecommunications corporation's number of active access lines in the designated support area.

(B[.]) Lifeline Support -- Eligible telecommunications corporations shall receive additional USF funds to recover any discount granted to lifeline customers, participating in a Commission-approved Lifeline program, that is not recovered from federal lifeline support mechanisms.

(C[.]) Exemptions -- Telecommunications corporations may petition to receive an exemption for any provision of this rule or to receive additional USF support, for use in designated support areas, to support additional services which the Commission determines to be consistent with universal service purposes and permitted by law.

 

KEY: public utilities, telecommunications, universal service fund

Date of Enactment or Last Substantive Amendment: [November 1, 2009]2010

Notice of Continuation: November 25, 2008

Authorizing, and Implemented or Interpreted Law: 54-3-1; 54-4-1; 54-7-25; 54-7-26; 54-8b-12; 54-8b-15