BILL NUMBER: SB 1122 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 31, 2016
AMENDED IN SENATE MARCH 29, 2016
INTRODUCED BY Senator Cannella
FEBRUARY 17, 2016
An act to amend Section 275.6 of, and to add Section 455.4 to, the
Public Utilities Code, relating to telecommunications.
LEGISLATIVE COUNSEL'S DIGEST
SB 1122, as amended, Cannella. Telecommunications: small
independent telephone corporations: rates: universal service:
California High-Cost Fund-A.
Under existing law, the Public Utilities Commission has regulatory
authority over public utilities, including telephone corporations.
Existing law authorizes the commission to fix just and reasonable
rates and charges for every public utility. Existing law, with
certain exceptions, prohibits a public utility from changing any
rate, except upon a showing before the commission and a finding by
the commission that the new rate is justified. Existing law requires
the commission to exercise its regulatory authority to maintain the
California High-Cost Fund-A Program (CHCF-A program) to provide
universal service rate support to small independent telephone
corporations, as defined, in amounts sufficient to meet the revenue
requirement, as defined, established by the commission through
rate-of-return regulation in furtherance of the state's universal
service commitment to the continued affordability and widespread
availability of safe, reliable, high-quality communications services
in rural areas of the state.
This bill would revise the CHCF-A program requirements to provide
that the revenue requirement of a small independent telephone
corporation includes rate case expenses, as defined, and
would require that rate case expenses be separately included in the
revenue requirement regardless of any commission determinations
regarding the reasonableness of other expenses. The
defined.
This bill would require the commission to issue its
final decision on a general rate case of a small independent
telephone corporation no later than 390 days following the
corporation's filing of its general rate case application or advice
letter initiating the general rate case. If the commission fails to
issue a final decision by the 390th day, the bill would
provide that the rate design proposed by the small independent
telephone corporation in its application or advice letter will take
effect on an interim basis, subject to an accounting true-up in a
final commission decision or resolution concluding the rate case, if
issued within 420 days. If a final decision or resolution concluding
the case has not been issued by the commission within 420 days, the
bill would provide that the interim rate design that went into effect
on the 390th day following the filing of the general rate case
application or advice letter would become final and that rate design
would remain in place until the commission issues a final decision or
resolution concluding the rate case, without any true-up accounting.
The bill would provide that any new rate design adopted in a final
decision or resolution issued by the commission after 420 days
following the filing of the application or advice letter would take
effect on a prospective basis only, as of the effective date of the
final decision or resolution. authorize the small
independent telephone corporation to file a tariff implementing
interim rates. The interim rates would generally be effective on the
first day of the first test year in the general rate case
application, subject to refund and adjustment upward or downward back
to the interim rate effective date, consistent with the final rates
adopted by the commission. The bill would provide that
its these provisions may be waived at any time
by mutual consent of the executive director of the commission and the
small independent telephone corporation.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 275.6 of the Public Utilities Code is amended
to read:
275.6. (a) The commission shall exercise its regulatory authority
to maintain the California High-Cost Fund-A Administrative Committee
Fund program (CHCF-A program) to provide universal service rate
support to small independent telephone corporations in amounts
sufficient to meet the revenue requirement established by the
commission through rate-of-return regulation in furtherance of the
state's universal service commitment to the continued affordability
and widespread availability of safe, reliable, high-quality
communications services in rural areas of the state.
(b) For purposes of this section, the following terms have the
following meanings:
(1) "Carrier of last resort" means a telephone corporation that is
required to fulfill all reasonable requests for service within its
service territory.
(2) "Rate base" means the value of a telephone corporation's plant
and equipment that is reasonably necessary to provide regulated
voice services and access to advanced services, and upon which the
telephone corporation is entitled to a fair opportunity to earn a
reasonable rate of return.
(3) "Rate case expenses" mean the reasonable costs
costs, as determined by the commission, incurred
by a telephone corporation in preparing, initiating, and
participating in any commission proceeding or advice letter process
in which its rates, rate design, or revenue requirement are evaluated
or adjusted.
(4) "Rate design" means the mix of end-user rates, high-cost
support, and other revenue sources that are targeted to provide a
fair opportunity to meet the revenue requirement of the telephone
corporation.
(5) "Rate-of-return regulation" means a regulatory structure
whereby the commission establishes a telephone corporation's revenue
requirement, and then fashions a rate design to provide the company a
fair opportunity to meet the revenue requirement.
(6) "Revenue requirement" means the amount that is necessary for a
telephone corporation to recover its reasonable expenses and tax
liabilities and earn a reasonable rate of return on its rate base.
Reasonable expenses include rate case expenses. Rate case
expenses shall be separately included in the revenue requirement
regardless of any commission determinations regarding the
reasonableness of other expenses.
(7) "Small independent telephone corporations" are rural incumbent
local exchange carriers subject to commission regulation.
(c) In administering the CHCF-A program
program, the commission shall do all of the following:
(1) Continue to set rates to be charged by the small independent
telephone corporations in accordance with Sections 451, 454, 455, and
728.
(2) Employ rate-of-return regulation to determine a small
independent telephone corporation's revenue requirement in a manner
that provides revenues and earnings sufficient to allow the telephone
corporation to deliver safe, reliable, high-quality voice
communication service and fulfill its obligations as a carrier of
last resort in its service territory, and to afford the telephone
corporation a fair opportunity to earn a reasonable return on its
investments, attract capital for investment on reasonable terms, and
ensure the financial integrity of the telephone corporation.
(3) Ensure that the rates charged to customers of small
independent telephone corporations are just and reasonable and are
reasonably comparable to rates charged to customers of urban
telephone corporations.
(4) Provide universal service rate support from the California
High-Cost Fund-A Administrative Committee Fund to small independent
telephone corporations in an amount sufficient to supply the portion
of the revenue requirement that cannot reasonably be provided by the
customers of each small independent telephone corporation after
receipt of federal universal service rate support.
(5) Promote customer access to advanced services and deployment of
broadband-capable facilities in rural areas that is reasonably
comparable to that in urban areas, consistent with national
communications policy.
(6) Include all reasonable investments necessary to provide for
the delivery of high-quality voice communication services and the
deployment of broadband-capable facilities in the rate base of small
independent telephone corporations.
(7) Ensure that support is not excessive so that the burden on all
contributors to the CHCF-A program is limited.
(d) In order to participate in the CHCF-A program, a small
independent telephone corporation shall meet all of the following
requirements:
(1) Be subject to rate-of-return regulation.
(2) Be subject to the commission's regulation of telephone
corporations pursuant to this division.
(3) Be a carrier of last resort in their service territory.
(4) Qualify as a rural telephone company under federal law (47
U.S.C. Sec. 153(44)).
(e) Upon request from the commission, a small independent
telephone corporation that receives support from the CHCF-A program
shall provide information regarding revenues derived from the
provision of unregulated Internet access service by that corporation
or its affiliate within that corporation's telephone service
territory. The commission shall treat as confidential any information
provided pursuant to this subdivision.
(f) The commission shall structure the CHCF-A program so that any
charge imposed to promote the goals of universal service reasonably
equals the value of the benefits of universal service to contributing
entities and their subscribers.
(g) This section shall remain in effect only until January 1,
2019, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2019, deletes or extends
that date.
SEC. 2. Section 455.4 is added to the Public Utilities Code, to
read:
455.4. (a) For purposes of this section, "small independent
telephone corporation" has the same meaning as in Section 275.6.
(b) A small independent telephone corporation may file its general
rate case application or advice letter initiating a general rate
case any time up to and including December 1 of the second year
preceding the test year used in its rate case.
(c) The commission shall issue its final decision on a general
rate case of a small independent telephone corporation no later than
390 days following the corporation's filing of its general rate case
application or advice letter initiating the general rate case.
(d) Notwithstanding Section 454, if the commission fails to issue
a final decision as required by subdivision (c), the rate design
proposed by the small independent telephone corporation in its
application or advice letter shall take effect on an interim basis
beginning 390 days following the filing of the application or advice
letter. That rate design shall be subject to an accounting true-up if
a final commission decision or resolution concluding the rate case
is issued within 420 days of the filing. The rate design adopted in a
commission decision or resolution within 420 days shall be made
effective as of the 390th day and the accounting true-up shall
eliminate any revenue differences between the interim rate design and
the rate design in the commission decision or resolution. If a final
decision or resolution concluding the case has not been issued by
the commission within 420 days of the filing, the interim rate design
that took effect on the 390th day following the filing of the
general rate case application or advice letter shall become final and
that rate design shall remain in place until the commission issues a
final decision or resolution concluding the rate case, without any
true-up accounting. Any new rate design adopted in a final decision
or resolution issued by the commission after 420 days following the
filing of the application or advice letter shall take effect on a
prospective basis only, as of the effective date of the final
decision or resolution.
(d) Notwithstanding Section 454, if the commission fails to issue
a decision as required by subdivision (c), the applicant may file a
tariff implementing interim rates that may be increased by an amount
equal to the rate of inflation as compared to existing rates. The
interim rates shall be effective on the first day of the first test
year in the general rate case application. These interim rates shall
be subject to refund and shall be adjusted upward or downward back to
the interim rate effective date, consistent with the final rates
adopted by the commission. The commission may authorize a lesser
increase in interim rates if the commission finds the rates to be in
the public interest. If the presiding officer in the case determines
that the commission's decision cannot become effective on the first
day of the first test year due to actions by the small independent
telephone corporation, the presiding officer or the commission may
require a different effective date for the interim rates or final
rates.
(e) The requirements of subdivisions (c) and (d) may be waived at
any time by mutual consent of the executive director of the
commission and the small independent telephone corporation.