ORDER NO. 97-435

ENTERED NOV 10 1997

This is an electronic copy. Appendices may not be included.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 875

DISPOSITION: SURCHARGE DECREASED

Under Oregon law, the Commission must review the Residential Service Protection Fund (RSPF) surcharge amount once each year and ensure that the fund balance does not exceed six months' worth of projected expenses. Commission counsel has advised the Commission that when the fund balance exceeds six months’ worth of projected expenses, we must bring it into compliance within a year. The RSPF and financial staff have completed their annual review of the surcharge revenues, expenditures, and ending balance, and have prepared a recommendation.

Staff’s Recommendation. At the October 21, 1997, public meeting, the Commission’s consent agenda included consideration of Staff’s RSPF surcharge recommendation. Staff recommended a surcharge amount of 10 cents per line for the next calendar year (1998), effective January 1, 1998. The surcharge in 1997 was 13 cents. Staff explained its recommendation by referring to several changes that have occurred in the revenue and expenditure patterns over the past year. These changes are:

The National Exchange Carrier Association (NECA) revised its interstate toll-free conversation reimbursement procedure effective July 1996. In the past, since it was impossible to distinguish between intrastate calls and interstate calls when using the relay, NECA billed Sprint for all long-distance calls. Since carriers of nonrelay calls are not required to reimburse NECA for intrastate calls, this resulted in excess payment by Sprint (and in turn by the State of Oregon) for those intrastate calls. NECA is now using a formula to determine the percentage of intrastate versus interstate calls (64% interstate

and 36% intrastate). As a result, we have received credit from Sprint of approximately $34,000 for the period of March to June 1996. We have continued to receive an interstate toll-free conversation credit from Sprint averaging $16,000 per month.

The Oregon Telecommunications Relay Service had grown at a rate of 12 percent per year for a number of years. The current annual growth rate is 3 percent.

As a result of the Federal Welfare Reform Act, the number of individuals receiving public assistance has dropped considerably and is continuing to drop. Staff anticipates the number of recipients will drop from about 33,000 to below 29,000 each month. Complicating the process of projecting the number of individuals receiving public assistance is the economy’s effect on the number of individuals receiving public assistance. At this time, the economy is strong. The drop in OTAP recipients may have as much to do with the strong economy as welfare reform. Staff will not know the full impact of welfare reform until the economy shifts. Staff reduced the number of recipients to match the number of active accounts and reduced the projected growth rate from 3 percent to zero.

Staff reviewed the impact of a 7 cent and a 9 cent surcharge before recommending the 10 cent figure. Staff concluded that although a 7 cent surcharge would almost certainly reduce the ending fund balance to below six months’ worth within the year, it would ensure a jump to as much as 15 or 19 cents on January 1, 1999. Staff’s projection of the 10 cent surcharge reveals that the six month ending fund balance will nearly be met. Whether it is actually met will depend on what economic and demographic trends occur over the next year and a half. However, if the ending balance is not met, Staff believes that the 10 cent amount can be maintained over the next years (until at least January 2001) and will continue to reduce the ending balance at a reasonable rate.

Commission Decision. At its October 21, 1997, public meeting, the Commission adopted Staff’s recommendation.

ORDER

IT IS ORDERED that the Residential Service Protection Fund surcharge amount be reduced to 10 cents per line for 1998, effective January 1, 1998.

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 service of this order. The request must comply with the requirements of OAR 860-014-0095. A copy of any such request must also be served on each party to the proceeding as provided by OAR 860-013-0070. A party may appeal this order pursuant to ORS 756.580.