ORDER NO. 95-1264

ENTERED NOV 30 1995

THIS IS AN ELECTRONIC COPY

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UI 93(6)

DISPOSITION: APPLICATION APPROVED WITH CONDITIONS

On August 29, 1995, GTE Northwest, Inc. (GTE-NW) filed this supplemental application pursuant to ORS 759.390, requesting Commission approval of five revised agreements governing a system version release hardware and software agreement with AG Communications Systems Corporation (AG).

At its November 21, 1995, public meeting, the Commission adopted staff's recommendation to approve the application with reporting conditions.

Based on the application and the Commission's records, the Commission makes the following:

FINDINGS OF FACT

GTE-NW provides telecommunications service to the public in Oregon.

Initial authorization for the GTE-NW purchase of a system version release (hardware and software) from AG to improve the Oregon telecommunications network was granted under Commission Order No. 90-2. Order No. 95-806 approved the fourth upgrade. Protective Order No. 95-1185 was issued in this docket on November 15, 1995.

The current supplemental application consists of five revised agreements governing: (1) The setting of terms and conditions for foreseeable business related issues through its term, ending September, 1999. No dollar transactions forecast is prepared because of the nature of the agreement; (2) The performance of telephone plant engineering, construction, installation or maintenance done on a competitive bid, quotation, unit price and hourly bid basis. Here, too, transactions forecasting is difficult but as a historical note, the $317,127 in 1994 total Oregon charges represents a 99 percent increase over 1993; (3) The deployment of general processor units for the switches. The total Oregon charge will be approximately $413,105 through 1998; (4) The development of switch enhancement software for new services. The total Oregon charge is projected to be $165,197 through 1999; (5) The development and purchase of replacement power supply units for the switches. The estimated Oregon charge is $460,710 over the next two year purchase period.

The first of the revised agreements (setting of terms and conditions for business related issues through September, 1999) satisfies a Commission compliance reporting requirement that dealt with a filing deficiency caused by the lack of any formal written contract or agreement with AG for the purchase of telecommunications apparatus, equipment, materials, or supplies other than the system version releases covered by this specific docket. Prior to the current revised agreement, GTE-NW filed an annual summary of its purchases from AG pursuant to Order No. 93-1424.

With the continuation of reporting conditions contained in Order No. 95-806, the supplemental application appears reasonable and advantageous to customers of GTE-NW.

OPINION

Jurisdiction

ORS 759.005 defines a "telecommunications utility" as anyone providing telecommunications service to the public in Oregon. GTE-NW is a telecommunications utility subject to the Commission's jurisdiction.

Affiliated Interest

GTE-NW and AG are affiliated interests under ORS 759.010 in that GTE Corporation owns 100 percent and 19.99 percent equity positions in the respective entities. Pursuant to the agreement underlying this joint venture with AT&T, the latter position has declined by sale from an initial 51 percent and will be liquidated on the first business day following December 31, 2003.

The Agreement

ORS 759.390 requires any telecommunications utility entering into a contract with an affiliated interest to file the agreement with the Commission. The statute requires the Commission to investigate to determine if the transaction is fair, reasonable, and not contrary to the public interest. The statute is designed to protect ratepayers from abuses which may arise from less than arm's length transactions.

There is no evidence of harm to GTE-NW’s customers or to the public from the agreement between GTE-NW and AG. For rate-making purposes in future proceedings, the Commission reserves judgment on the reasonableness of the financial impacts of the agreement.

CONCLUSIONS

GTE-NW is a telecommunications utility subject to the Commission's jurisdiction.

 

An affiliated interest relationship exists between GTE-NW and AG.

 

The subject agreement is fair, reasonable, and not contrary to the public interest.

 

The Commission should grant the application.

 

ORDER

IT IS ORDERED that the supplemental application of GTE Northwest, Inc. for approval of the five revised agreements with AG Communications Systems Corporation is granted. All requirements and provisions of Order No. 95-806 remain in effect. The compliance filing pursuant to Order No. 93-1424, Appendix A, page 3, is no longer required. That requirement called for an annual summary of the purchases of GTE Northwest, Inc. from AG Communications Systems Corporation.

Made, entered, and effective ________________________.

A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A request for rehearing or reconsideration must be filed with the Commission within 60 days of the date of this order. The request must comply with the requirements of OAR 860-14-095. A copy of any such request must also be served on each party to the proceeding as provided by OAR 860-13-070(2). A party may appeal this order to a court pursuant to ORS 756.580