INTRODUCTION - California

?Decision 20-08-023August 6, 2020 ASK AgendaNo "Enter the agenda item number (e.g. CA-4)" [/d "Agenda Item No."] \* MERGEFORMAT Before The Public Utilities Commission Of The State Of CaliforniaOrder Instituting Rulemaking into the Review of the California High Cost Fund-A Program.Rulemaking 11-11-007ORDER Modifying Decision (D.) 18-10-033 and denying rehearing of decision, as modifiedINTRODUCTIONIn this Order, we dispose of the Application for Rehearing of Decision(D.) 18-10-033, filed by Calaveras Telephone Company, Cal-Ore Telephone Co., Ducor Telephone Company, Foresthill Telephone Co., Kerman Telephone Co., Pinnacles Telephone Co., The Ponderosa Telephone Co., Sierra Telephone Company, Inc., The Siskiyou Telephone Company, and Volcano Telephone Company (collectively Independent Small LECs or Small LECs). In D.18-10-033 (the Decision or 2018 Decision), the Commission denied a Petition for Modification of D.15-05-048 (2015 Decision) filed by the Independent Small LECs. D.15-05-048 adopted a Rate Case Plan for General Rate Cases (GRCs) for California High Cost Fund-A (High Cost Fund-A, or A-Fund CHCF-A). The Petition for Modification sought to clarify that the adoption of the Rate Case Plan in the 2015 Decisions did not foreclose filing GRCs by advice letter.BACKGROUNDOn November 11, 2011, the Commission issued Order Instituting Rulemaking (OIR) 11-11-007 for the purposes of reviewing the California High Cost Fund-A (CHCF-A, High Cost Fund-A, or A-Fund.). (R.11-11-007, at p. 1.) Phase One of this proceeding resulted in the issuance of D.14-12-084, which addressed issues related to the High Cost Fund-A. With the exception of putting a freeze on GRCs for small LECs during the pendency of this decision (see D.13-02-005), this phase of the proceeding did not deal with the methods for filing GRCs nor the timing of GRCs. In August of 2014, the California Legislature passed Assembly Bill (AB) 1693, which would have put a deadline on the Commission for completing GRCs for approximately ten small LECs, which primarily served rural areas. The Legislative analysis of that bill indicates that, while both formal cases (by applications) and informal cases (by advice letter) used take about a year to complete, they were now taking longer. The purpose of the bill was to ensure timely completion. (See Assembly Floor Analysis of AB 1693, 10/8/14.) It did not make a distinction between formal applications and informal advice letters. On September 20, 2014, the bill was vetoed by Governor Brown because it set inflexible time limits. However, the Governor’s veto message directed the Commission “to address the concerns of the proponents and to create a Rate Case Plan to encourage timely completion of these rate cases.” (Assembly Floor Analysis of AB 1693, 10/8/14.) On December 9, 2014, the Assigned Commissioner in R.11-11-007 issued a Second Amended Scoping Memo (Scoping Memo), which added consideration of a GRC Plan for Small LECs who draw from the CHCF-A program. The Scoping Memo proposed a General Rate Case Plan, including a proposed GRC application cycle that would allow ten GRCs every three years. (Scoping Memo, Attachment A, at p. 1.) In addition, Attachment A included proposed benchmarks that included, among other things, a pre-hearing conference, discovery, submission of testimony, hearings, the closing of the record by an administrative law judge (ALJ), and issuance of a “Proposed Decision.” In Opening Comments to the Scoping Memo, the Office of Ratepayer Advocates (ORA) submitted a proposed GRC schedule that similarly included benchmarks for the filing of testimony, evidentiary hearings, and a Proposed Decision. (ORA Opening Comments, Attachment A, at p. 7.) ORA also stated that a simpler procedural alternative should be available for Small LECs which were “able to demonstrate the availability and adequacy of minimum data requirements.” (ORA Opening Comments, at p. 4.) ORA proposed a process by which Small LECs could request and submit a GRC through a Tier III advice letter. (Ibid.) ORA’s specific proposal would allow a Small LEC to seek a waiver of a GRC scheduled under the Rate Case Plan by a letter to the Executive Director with copies to ORA and the Communications Division (CD). (ORA Opening Comments, Attachment A, at p. 6.) In Reply Comments to the Scoping Memo, the Independent Small LECs agreed with ORA’s view that a Tier III advice letter should be an option for submitting rate cases. However, the Independent Small LECs stated that this process already existed under GO-96-B, and that there was no reason to revise this process “[a]side from confirming the overall timeline for completion of the rates case,” which should be 13 months with a 60-day extension for good cause. (Independent Small LEC Reply Comments, at pp. 13-14.) TDS Telecom’s Reply Comments agreed that the advice letter process should continue to be available, “at the company’s discretion,” without having to seek a waiver. (See TDS Telecom Reply Comments, at pp. 5-6.) On June 26, 2015, the Commission issued D.15-06-048 (2015 Decision), which established a General Rate Case Plan. There was no discussion in the 2015 Decision of the advice letter process. No party filed an application for rehearing of this decision.On July 11, 2017, the Independent Small LECs filed a Petition for Modification (Petition) of D.15-06-048. No party filed a response or opposition to the Petition. The Petition contended that the Decision was not intended to remove the option of filing GRCs by advice letter. However, Petitioners continued, because the Decision and Rate Case Plan use the word “application,” it could be read to require formal applications and should be modified to include advice letters. The Independent Small LECs’ justification for filing the Petition two years after the 2015 Decision, was that they did not know and had no reason to know that the 2015 Decision foreclosed the advice letter process until shortly before they filed the Petition. (Petition for Modification of D.15-06-048, at pp. 3-4.) According to the Independent Small LECs, they were not aware that the 2015 Decision foreclosed advice letter filings for Small LEC GRCs until the spring of 2017, when Pinnacles Telephone Company, the smallest of the Independent Small LECs, asked CD about filing its GRC by advice letter. The question did not arise sooner, the Independent Small LEC assert, because carriers filing in the first two one-year rate case cycles elected to file applications. In late April 2017, the Interim Director of CD opined that advice letter filings were no longer a possible avenue for GRCs. (See App. for Rehg., at pp. 4-5, citing Petition and Declaration of Patrick M. Rosvall.) On June 8, 2017, during a PHC for the next phase of the proceeding, the Small LECs requested a clarification of the 2015 Decision. ALJ Colbert, the then-assigned ALJ expressed the same view as the CD Interim Director. (Reporter’s Transcript, June 8, 2017, at 350:1-4.)On October 31, 2018, the Commission issued the instant Decision, which summarily denied the Petition for Modification on procedural grounds. (D.18-10-133, at p. 9.) The Decision states that the Petition did not comply with Rule 16.4(d) of the Commission’s Rules of Practice and Procedure and further finds that the Independent Small LEC’’ belief that D.15-06-048 was not intended to foreclose the option to commence a general rate case by advice letter “is not a reasonable interpretation.” (D.18-10-033, at p. 6.)The Independent Small LECs filed an Application for Rehearing of D.18-10-033 on November 30, 2018. No party responded to the Application. The Application contends that the Decision errs as follows: (1) The Decision modifies prior Commission decisions and a Commission General Order without proper notice to interested parties or an opportunity to be heard; (2) the Decision’s procedural conclusions and reasoning constitute an abuse of discretion; and (3) the Decision’s rejection of the substance of the Petition is an abuse of discretion.DISCUSSIONWhether the Decision modifies prior Commission decisions and a General Order without proper notice or an opportunity to be heard. The Independent Small LECs contend that the Decision errs in finding that D.15-06-048 was intended to remove the option to commence a GRC by advice letter. Among other things, the Independent Small LECs cite past decisions and rulemakings, going back to 1982, that have allowed GRCs to be filed by advice letter. In addition, they rely on GO-96B, which allows a GRC-LEC to file a change to a “rate, charge, term, or condition” by a Tier III Advice Letter. (GO 96-B, Telecommunications Rule 7.3(4).)There are two parts to this argument. First, the Independent Small LECs contend that, because the 2015 Decision did not address the advice letter process, and failed to address prior law or practice allowing Small LECs to file GRCs by advice letters, the Decision cannot be read to foreclose filing by advice letter. (App for Rehg., at pp. 6-9.) Second, if the 2015 Decision is interpreted to foreclose the advice letter process, it strips the Independent Small LECs of a procedural right without notice and opportunity to be heard. (Ibid.) The Small LECs also rely on Public Utilities Code section 1708, which requires notice and opportunity to be heard before the Commission may rescind, alter, or modify any prior decision. (App for Rehg., at p. 8.) Further, the Independent LECs assert that this issue was not included in the Scoping Memo, in violation of Southern California Edison Co. v. Pub. Util. Com. (2006) 140 Cal App 1085, 1106 (annulling a Commission decision on the issue of prevailing wage, which was beyond the scope of the issues identified in the scoping memo). (App for Rehg., at p. 9.) We do not dispute that there is a long history of Small LECs filing GRCs by advice letter. We note however, that the utilization of advice letters is not absolute and depends on the facts and circumstances of any given case. Pursuant to GO 96-B, General Rule 5.1, the advice letter process provides a “quick and simplified review” of the types of requests that are not expected to be “controversial nor to raise important policy questions.” In addition, the advice letter process is not appropriate for any case in which evidentiary hearings are required. (GO 96-B, Rules 5.1 and 5.2.) The Independent Small LECs appear to recognize this but are objecting to the interpretation of the 2015 Decision that it forecloses the advice letter process for Small LEC GRCs. The Independent Small LECs cite to numerous GRCs filed by advice letter which were resolved by resolutions. (App. for Rehg., at p. 3.) We also recognize that past decisions have indicated that Small LECs may file rate change proceedings, including GRCs, by advice letter. And, as pointed out by the Independent Small LECs, GO 96-B, Telecommunications Industry Rule 7.3(4), states that “change by a GRC-LEC to a rate, charge, term or condition” is appropriate for a Tier III Advice Letter. We do not agree that a “rate change” necessarily refers to a GRC. The Independent Small LECs contend that D.07-09-019, which adopted the GO 96-B Telecommunications Industry Rules, confirms that “all rate changes,” include GRCs. (App. for Rehg., at p. 6.) In D.07-09-019, the Commission responded to a suggestion by Pacific Bell to include language about price floors and ceilings to differentiate between Tier I and Tier III advice letters. The Commission stated: “We believe the rule will be more clear and accurate if it refers simply to rate changes, and because GRC-LECs are rate-regulated and are commonly subsidized, all of their rate changes should be submitted for review via Tier 3 advice letters.” (D.07-09-019, at p. 25, emphasis added.) The Commission appears to be saying that rate changes by GRC-LECs should be subject to at least a Tier III advice letter as opposed to a lower tier. We do not believe that, in context, this supports the Independent Small LECs interpretation that all GRCs could be filed by advice letter. The Independent Small LECs also contend that the rule permitting rate changes through advice letters was carried through from GO 96-A, which “enabled all small LECs to seek general rate changes through the advice letter process.” (App. for Rehg., at p. 6, citing OIR 97-06-038.) The Independent Small LECs point out that the 1997 OIR characterizes “general rate changes” as “general rate case[s].” The 1997 OIR relies in turn on D.82-08-072, 9 CPUC2d 603, 606. D.82-08-072 addressed language in GO 96-A that allowed Small LECs to file general rate increases, including GRCs, by advice letter, depending on whether the rate increase was “minor.” Whether the increase was “minor” was based on annual operating revenue of a specific amount. In D.82-08-072, the Commission concluded that having a specific revenue limitation which “may automatically determine whether the revenue increase requested is minor in nature serves no useful purpose.” It appears far better to judge each filing on its own as to whether the increase is of such a minor nature that it can be handled by the advice letter procedure be it a general rate increase or a more narrow change.(D.82-08-072, 9 CPUC2d 603, 606.) What these cases demonstrate is that advice letters for Small LEC GRCs were permitted. However, the filing of an advice letter versus an application always depended on the circumstance of each case. Relying on precedent that permitted advice letters for Small LEC GRCs, the Independent Small LECs assert that the failure to discuss advice letters indicates that the 2015 Decision intended to keep in place the GO-96B advice letter process for GRCs. However, as stated above, the Scoping Memo proposed a General Rate Case Plan that was clearly a formal process with proposed benchmarks that included, among other things, a pre-hearing conference, discovery, submission of testimony, hearings, the closing of the record by an ALJ, and issuance of a “Proposed Decision.” (Scoping Memo, Attachment A, at p. 1.) The fact that there was no discussion of the advice letter process in the 2015 Decision supports our view that the Rate Case Plan was intended to supplant the advice letter process for all Small LEC GRCs. Moreover, whether the intent was entirely clear at the beginning of the proceeding, by the time a Proposed Decision issued it should have been clear that the Rate Case Plan required applications from all the Independent Small LECs. (See, e.g., D.15-06-048, at pp. 26, O.P. 1.) Alternatively, the Independent Small LECs argue that, if the 2015 Decision intended to foreclose the use of advice letters, the decision violated due process, Public Utilities Code section 1708, and Southern California Edison Co. v. Pub. Util. Com. (2006) 140 Cal App 1085 [failure to include issue in Scoping Memo], because the Commission failed to give notice of its intent to foreclose the advice letter process for Small LEC GRCs. We need not reach this issue because, as discussed below, we do not believe the Small LECs have justified failing to file an application for rehearing of the 2015 Decisions. Moreover, the Independent Small LECs may not use a petition for modification to address legal issues that should have been raised in a timely application for rehearing of the original decision. (Northern California Assn. to Preserve Bodega Head & Harbor, Inc. v. Public Utilities Com.?(1964) 61 Cal.2d 126,135 [a party cannot cure its failure to “seasonably” seek judicial review of a decision by a series of late-filed petitions, when in fact it is seeking review of the basic decision].) Whether the Decision errs in dismissing the Petition for Modification.The Independent Small LECs argue that the Decision errs in concluding that the Petition “does not meet the requirements of Rule 16.4 to demonstrate why the Petition was not brought within one year.” (App for Rehg., at p. 10, quoting 2018 Decision, at p.12.) The Independent Small LECs contend that the decision is arbitrary and capricious for several reasons. First, the Independent Small LECS assert that the Decision ignores the “compelling justification” provided by the Petition, which is that there was no basis to seek modification prior to April of 2017 because there was nothing in the 2015 Decision to suggest that the advice letter process was not still available. (App for Rehg., at p. 10.) The 2018 Decision gives a few reasons for rejecting the Petition, but the main reason is that Independent Small LECs’ belief that the 2015 Decision was not intended to foreclose filing GRCs by advice letter “is not a reasonable interpretation.” (D.18-10-033, at p. 6.) Thus, the 2018 Decision concludes that the Independent Small LECs did not justify the delay of two years from the time the 2015 Decision was issued to the date the Petition was filed in 2017.We agree with this conclusion. As stated above, the proposed Rate Case Plan was always a formal process. We understand that the ORA and the Independent Small LECs raised the issue of the use advice letters in comments. ORA proposed a waiver request. (ORA Opening Comments, Attachment A, at p. 6.) The Independent Small LECs opposed this, stating that nothing needed to be done because the advice letter rules were already in place. The Independent Small LECs further stated that they “reserve the right to submit their rate cases informally, consistent with established practice.” (Independent Small LEC Reply Comments, at p 14.) We recognize that the Commission did not address this issue in the 2015 decision. But we also note that other than these initial comments, the issue of advice letters was not raised again on the record, even in comments to the PD. As for reserving the right to file an advice letter, this is a unilateral statement that does not impact the outcome. After adopting a three-year schedule that included all the Independent Small LECs, with a schedule that included a PHC, discovery, the filing of testimony, evidentiary hearings, and a proposed decision by an ALJ, it is not reasonable to think that any of the Independent Small LECs could simply decide on their own to file an advice letter instead. We conclude that the Independent Small LECs were aware, or should reasonably have been aware, that the 2015 Decision foreclosed the advice letter process. Second, the Independent Small LECs assert that the 2018 Decision relies on a mischaracterization of the Small LECs’ Petition. (App for Rehg., at pp. 10-11.) The Independent Small LECs’ Petition asserted that there were “conflicting interpretations” of the status of the informal rate case process, with ORA, TURN, the TDS Companies, and the Independent Small LECs supporting the view that the informal process should be an option. The Decision does mischaracterize that position by presenting it as “conflicting interpretations” among Commission staff, or between Commission Staff and the ALJ. (See D.18-10-033, at pp. 3-4, 5, and 9.) We will modify the decision accordingly. Third, the Independent Small LECs contend that the Decision includes citation to unsupported extra-record materials, particularly to workshop materials. (Petition, at pp. 11-12.) The Decision does discuss the workshops. (D.18-10-033, at pp. 7-8.) The workshop materials are not part of the record and there is no transcript from the workshops. Nevertheless, the 2015 Decision includes the date of the workshop, the issues discussed, and the attendees. (D.15-06-048, at p. 16-17.) The only “extra-record reference” in the 2018 Decision is the statement that the Independent Small LECs had the opportunity to raise this issue at the workshops but “did not avail themselves of these avenues to discuss the advice letter process.” (D.18-10-033 at p. 8.) We do not believe this statement is consequential to the Decision denying the Petition for Modification. But because there is no transcript of the workshop discussions, we will delete this reference. Whether the Decision errs in rejecting the Petition for Modification for substantive reasons.The Independent Small LECs contend that the Decision errs in addressing the substantive merits of the Petition without any basis. (App. For Rehg., at pp.12-13. Relying on a Commission policy initiative favoring transparency, the Decision states that the advice letter process is not as transparent as the application process and that the public does not have as much access to all the steps before an advice letter is resolved. (D.18-10-033, at p.8)The Decision summarily denies the Petition under Rule 16.4(d) of the Commission’s Rules of Practice and Procedure. As such, the Decision does not need to address the substance of the application versus advice letter issue. Further, because any substantive reasons for not allowing advice letters are outside the record in this proceeding, we will modify the Decision accordingly.CONCLUSIONThe Decision should be modified as discussed above and the Application for Rehearing should be denied. However, going forward, we believe we should address the issue of whether it is appropriate for Small LECs to file GRCs by advice letters. In the 2015 Decision, we stated that the Rate Case Plan would be subject to review after the three-year cycle of submissions is complete. (D.15-06-048, at p. 4.) Because that cycle is now complete, we will direct the ALJ in this proceeding to schedule such a review with a specific focus on whether we should allow Small LECs to file GRCs by advice letters in some circumstances. As stated above, the use of an advice letters is never absolute and depends on the facts and circumstances of any given case. The advice letter process provides a quick and simplified review for certain requests. The advice letter process is thus not appropriate for complex or controversial matters, nor for any case in which evidentiary hearings are required. (GO 96-B, Rules 5.1 and 5.2.) In addressing the possible use of advice letters for Small LEC GRCs, these parameters should be kept in mind. THEREFORE, IT IS ORDERED that: 1.Decision 18-10-033 is modified as follows:a. On page 4, line 1, delete the word “contrasted” and replace with the word “consistent.”b. On page 4, delete the last sentence in the first partial paragraph (beginning with “The Small ILECs in their petition”) and replace with the following:“The Small ILECs in their petition state that there are conflicting interpretations of the status of the informal rate case process. ORA, TURN, the TDS Companies and the Independent Small LECS all support the view that the informal process should be an option.”c. On page 5, delete the final sentence on the page (beginning with “The Small ILECs in their petition”).d. On page 7, line 5, delete “Tier II’ and replace with “Tier III.”e. On page 8, in the first partial paragraph, delete the final sentence that reads: “The parties did not avail themselves of these avenues to discuss the advice letter process.” f. On page 8, delete the full middle paragraph (beginning with “One of the Commission’s policy initiatives is to”)g. On page 8, in the first line of the final paragraph, delete “Section 3.1” and replace with “Section 2.”h. On page 8, footnote 16, delete reference to page “16” of D.15-06-048 and replace with page “18.” i. On page 9, delete the first full sentence in the first full paragraph (beginning with “As noted supra”) j. On page 11, delete Conclusion of Law 2.3.Rehearing of D.18-10-033, as modified, is denied. 4.We direct the ALJ in this proceeding to schedule a review of the issue of whether advice letters should be allowed in lieu of a formal application in some circumstances. Dated August 6, 2020, at San Francisco, California.MARYBEL BATJER PresidentLIANE M. RANDOLPHMARTHA GUZMAN ACEVESCLIFFORD RECHTSCHAFFENGENEVIEVE SHIROMA Commissioners ................
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