DAR File No. 27302

Public Service Commission, Administration

R746-360-9

One-Time Distributions from the Fund

NOTICE OF PROPOSED RULE

DAR File No.: 27302
Filed: 07/15/2004, 10:33
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The expenditure level on a per project basis has increased significantly. Further, the characteristics of the projects have also changed to be large subsidies for small groups or individuals. The Commission determined that the public interest would be best served if the one-time distribution rules were amended to address the two observed concerns.

Summary of the rule or change:

The amendment revises the total amount of money the Universal Service Support Fund will pay for a project from $25,000 to $10,000. The change will also increase the percentage of the costs of a relatively low-cost project that is paid for by the Universal Service Support fund. It will decrease the percentage of costs paid for by the Fund for relatively expensive projects. Further, it will decrease the percentage of costs paid directly by the potential customer for low-cost projects, and increase the percentage of costs paid by the customer for expensive projects.

State statutory or constitutional authorization for this rule:

Sections 54-3-1, 54-4-4-1, and 54-8b-15

Anticipated cost or savings to:

the state budget:

Unknown, as the number of applications for use of Universal Service Funds is driven by the number of and location of customers in high cost areas which qualify for use of Universal Service Funds. However, since the cap amount has been significantly reduced, we expect a significant positive savings on a net basis.

local governments:

No impact--This rule does not affect local government budgets.

other persons:

Telecommunications corporations that receive reimbursement payments will see an decrease in the amount of contribution levels for one-time projects using Universal Service Funds. Customers may see an increase or decrease in out of pocket expenses; an increase for those located in very high cost areas and a decrease for those located in relatively lower cost high cost areas.

Compliance costs for affected persons:

There is no net change in these costs.

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

There should be no impact on businesses. The Universal Service Fund is used to assist in defraying the costs associated with extension of telephone service in high cost areas of the State of Utah; it is focused on increasing residential service penetration.

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

Direct questions regarding this rule to:

Barbara Stroud at the above address, by phone at 801-530-6714, by FAX at 801-530-6796, or by Internet E-mail at bstroud@utah.gov

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:

08/31/2004

This rule may become effective on:

09/01/2004

Authorized by:

Barbara Stroud, Paralegal

RULE TEXT

R746. Public Service Commission, Administration.

R746-360. Universal Public Telecommunications Service Support Fund.

R746-360-9. One-Time Distributions From the Fund.

A. Applications for One-Time Distributions -- Telecommunications corporations, whether they are or are not receiving USF funds under R746-360-7 or R746-360-8, potential customers not presently receiving service because facilities are not available, or customers receiving inadequate service may apply to the Commission for one-time distributions from the fund for extension of service to a customer, or customers, not presently served or for amelioration of inadequate service.

1. These distributions are to be made only in extraordinary circumstances, when traditional methods of funding and service provision are infeasible.

2. One-time distributions will not be made for:

a. New subdivision developments[ with four units or more];

b. Property improvements, such as cable placement, when associated with curb and gutter installations; or

c. [Exclusively s]Seasonal developments that are exclusively vacation homes.

i. Vacation home is defined as: A secondary residence which is primarily used for recreation and is unoccupied for a period of four consecutive weeks per year.

3. An application for a one-time distribution may be filed with the Commission by an individual or group of consumers desiring telephone service or improved service, a telecommunications corporation on behalf of those consumers, the Division of Public Utilities, or any entity permitted by law to request agency action. An application shall identify the service(s) sought, the area to be served and the individuals or entities that will be served if the one-time distribution is approved.

4. Following the application's filing, affected telecommunications corporations shall provide engineering, facilities, costs, and any other pertinent information that will assist in the Commission's consideration of the application.

5. In considering the one-time distribution application, the Commission will examine relevant facts including the type and grade of service to be provided, the cost of providing the service, the demonstrated need for the service, whether the customer is within the service territory of a telecommunications corporation, whether the proposed service is for a primary residence, the provisions for service or line extension currently available, and other relevant factors to determine whether the one-time distribution is in the public interest.

B. Presumed Reasonable Amounts and Terms -- Unless otherwise ordered by the Commission, the maximum one-time distribution will be no more than $[25]10,000 per customer[ for rate-of-return regulated companies and $23,000 per customer for non-rate-of return companies]. The Commission will presume a company's service or line extension terms and conditions reasonable, for a subscriber in connection with one-time universal service fund distribution requests, if the costs of service extension, for each extension, are recovered as follows:

1. For [rate-of-return]all regulated[ companies:

a. The first $500] Local Exchange Carriers who request USF One-Time Distribution support for facility placement:

a. The first $2,500 of cost coverage per account is provided by the company; and[

b. F]for cost amounts exceeding [the $500 level, cost,]$2,500 per account up to two times the statewide average loop investment per account for all [rate-of-return regulated]telecommunication companies, as determined annually by the Division of Public Utilities, will pay 50 percent of the costs of the project.[ equally provided by the company and the customer.

2. For non-rate-of-return companies:

a. The same terms as required of rate-of-return companies in R746-360-9(B)(1) and, for amounts that exceed two times the statewide average loop investment plus $500, the company will provide additional amounts, up to an additional $2,000 for each extension.

3. Other terms and conditions for service extension shall be reviewed by the Commission in its consideration of an application and may be altered by the Commission in order to approve the use of universal service funds through the requested one-time distribution.

C. Combination of One-Time Distribution Funds with Additional Customer Funds and Future Customer Payment Recovery --

1. When the Commission grants an application and approves the use of universal service funds through a one-time distribution, 95 percent of service extension costs, above those recovered through the service extension cost recover terms specified in R746-360-9(B), shall be paid through universal service funds, up to the maximum universal service fund expenditure levels specified by this rule. The remaining five percent, or any additional amounts, shall be paid by additional]

b. For projects that exceed $2,500 per account, but are equal to or less than $10,000 per account, the customer shall pay 25 percent of the costs that exceed $2,500. For projects that exceed $10,000 per account, but are equal to or less than $20,000 per account, the customer shall pay 50 percent of the costs that are greater than $10,000 plus the previously calculated amount. For projects exceeding $20,000 per account the customer shall pay 75 percent of the cost above $20,000 until the State Universal Service Support Fund has paid $10,000 per account, any project costs above that level will be paid for 100 percent by the customer.

c. The State Universal Service Support Fund shall pay the difference between the sum of the defined company contributions plus customer contribution[s beyond those specified in R746-360-9(B).

2. Potential] amounts and the total project cost up to the $10,000 limit.

2. Other terms and conditions for service extension shall be reviewed by the Commission in its consideration of an application and may be altered by the Commission in order to approve the use of universal service funds through the requested one-time distribution.

C. Combination of One-Time Distribution Funds with Additional Customer Funds and Future Customer Payment Recovery --

1. At least 51 percent of the potential customers must be full-time residents in the geographic area being petitioned for and must be willing to pay the initial up-front contribution to the project as calculated by the Commission or its agent.

2. Qualified customers[ in the area] shall be notified by the telecommunications corporation of the nature and extent of the proposed service extension[, the Commission's approval of the application, and] including the necessary customer contribution amounts to participate in the project. Customer contribution payments shall be made prior to the start of construction. In addition to qualified customers, the Local Exchange Company needs to make a good faith effort to contact all known property owners within the geographic boundaries of the proposed project and invite them to participate on the same terms as the qualified customers.

3. New developments and empty lots will not be considered in the cost analysis for USF construction projects unless the lot owner comes forth and is willing to pay the per account costs for each lot as specified in this rule.

[3.]4. Potential customers who are notified and initially decline participation in the line extension project, but subsequently decide to participate, prior to completion of the project, may participate in the project if they make a customer contribution payment, prior to completion of the project, of 105 percent of the original customer contribution amount.

[4]5. For a period of five years following completion of [the]a project, [potential customers who were notified and initially declined to participate in the project, prior to its completion, may participate by making a customer contribution payment of 110 percent of the original customer contribution amount.

5. For a period of five years following completion of the project, customers who did not receive the initial notification,]new customers who seek telecommunications service in the project area, shall pay a customer contribution payment equal to 110 percent of the amount paid by the original customers in the project.

6. The telecommunications corporation shall ensure that all customer contribution payments required by R746-360-9(C)(3), (4), and (5) are collected. Funds received through these payments shall be sent to the universal service fund administrator. The company is responsible for tracking and notification to the Commission when the USF has been fully compensated. All monies will be collected and reported by the end of each calendar year, December 31st.

7. For each customer added during the five-year period following project completion, the telecommunications corporation and new customers shall bear the costs to extend service pursuant to the company's service or line extension terms and conditions, up to the telecommunications corporation's original contribution per customer for the project and the customer contributions required by this rule. The company may petition the Commission for a determination of the recovery from the universal service fund and the new customer for costs which exceed this amount.

D. Impact of Distribution on Rate of Return Companies -- A one-time distribution from the fund shall be recorded on the books of a rate base, rate of return regulated LEC as an aid to construction and treated as an offset to rate base.

E. Notice and Hearing -- Following notice that a one-time distribution application has been filed, any interested person may request a hearing or seek to intervene to protect his interests.

F. Bidding for Unserved Areas -- If only one telecommunications corporation is involved in the one-time distribution request, the distribution will be provided based on the reasonable and prudent actual or estimated costs of that company. If additional telecommunications corporations are involved, the distribution will be determined on the basis of a competitive bid. The estimated amount of the one-time distribution will be considered in evaluating each bid. Fund distributions in that area will be based on the winning bid.

KEY: public utilities, telecommunications, universal service

[December 1, 2003]2004

Notice of Continuation November 25, 2003

54-7-25

54-7-26

54-8b-12

54-8b-15

ADDITIONAL INFORMATION

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For questions regarding the content or application of this rule, please contact Barbara Stroud at the above address, by phone at 801-530-6714, by FAX at 801-530-6796, or by Internet E-mail at bstroud@utah.gov

For questions about the rulemaking process, please contact the Division of Administrative Rules (801-538-3764). Please Note: The Division of Administrative Rules is NOT able to answer questions about the content or application of these administrative rules.