ORDER NO. 96-260

ENTERED OCT 07 1996

This is an electronic copy.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UI 151

DISPOSITION: APPLICATION APPROVED WITH CONDITIONS

On July 18, 1996, GTE Northwest, Incorporated (GTE-NW or Company) filed an application, pursuant to ORS 757.480 and ORS 757.495, requesting approval to consolidate and transfer its short-term financing activities to GTE Funding Corporation (GTEF), an affiliated interest.

At its public meeting on September 24, 1996, the Commission adopted Staff’s recommendation to approve the application with conditions.

Based on the application and its record, the Commission makes the following:

FINDINGS OF FACT

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

GTE-NW and GTEF are affiliated interests under ORS 759.010 in that GTE Corporation wholly owns both entities.

The GTE Telephone Operating Companies (GTOCs) currently satisfy short-term financing requirements individually through commercial paper issuances. This contract will consolidate these activities. No change in risk exposure results from this consolidation.

GTEF will not derive any profits from the financing transactions. The aggregation of borrowings is projected to lower interest rates by 1.5 to 2.5 basis points from the rates available to individual GTOCs. Additionally, this arrangement permits GTEF to invest any surplus funds and, through a netting process, minimize external borrowings. This will decrease administrative costs by approximately $50,000 a year.

OPINION

Applicable Law

ORS 757.495 requires public utilities to seek approval of contracts with affiliated interests within 90 days after execution of the contract. The intent of the statute is to protect ratepayers from the abuses which may arise from less than arm's length transactions. Portland General Electric Company, UF 3739, Order No. 81-737 at 6. Failure to file within the 90-day time limit may preclude the utility from recovering costs incurred under the contract. See

ORS 757.495.

ORS 757.495(3) requires the Commission to approve the contract if the Commission finds that the contract is fair and reasonable and not contrary to the public interest. However, the Commission need not determine the reasonableness of the contract for ratemaking purposes. The Commission may reserve that issue for a subsequent proceeding.

CONCLUSIONS

1. GTE-NW is a public utility subject to the jurisdiction of the Commission.

2. An affiliated interest relationship exists between GTE-NW and GTEF.

3. The agreement between GTE-NW and GTEF is fair, reasonable, and not

contrary to the public interest.

4. The application should be granted.

ORDER

IT IS ORDERED that the application of GTE Northwest Incorporated for authority to consolidate and transfer its short-term financing activities to GTE Funding Corporation (GTEF), an affiliated interest, is granted, subject to the following conditions:

1. GTE-NW shall provide the Commission access to all books of account as well as all documents, data, and records of GTE-NW and GTEF which pertain to transactions between the two.

 

2. The Commission reserves the right to review for reasonableness all financial aspects of this arrangement in any subsequent rate proceeding or earnings review under an alternative form of regulation.

 

3. GTE-NW must notify the Commission in advance of any substantive changes to the agreement. Any changes which alter the intent or extent of the agreement shall be submitted for approval in an application for supplemental order, or other appropriate format, in this docket.

 

Made, entered, and effective ________________________.

A party may request rehearing or reconsideration of this order within 60 days pursuant to

ORS 756.561. A party may appeal this order pursuant to ORS 756.580.