ORDER NO. 98-024

ENTERED JAN 16 1998

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

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 871

On October 28, 1997, Pacific Telecom, Inc. (PTI) filed a petition to revise its rates of depreciation for several classes of its depreciable property, retroactively effective to January 1, 1997. On November 26, 1997, a prehearing conference to set a schedule was held in this matter in Salem, Oregon. Staff proposed a schedule, which the parties discussed and adopted. On December 22, 1997, Commission Staff (Staff) filed its direct testimony. The purpose of the direct testimony is to sponsor a stipulated agreement between Staff and PTI. On December 24, 1997, PTI and Staff filed a stipulation, executed by both parties, resolving all issues in this docket. The stipulation is appended as Attachment A and incorporated herein by reference.

PTI requested increased depreciation expense in its digital switching and copper cable accounts. The request for a faster rate of depreciation for digital switching recognizes the increased speed at which electronic based equipment is being replaced by newer, lower cost electronics with expanded capacity. The request also anticipates that fiber optic or wireless transmission facilities will shorten the service potential of existing copper cable. PTI also requests decreases in depreciation expense in two accounts in which its reserves are very large.

PTI’s request was supported by a depreciation study conducted by AUS Consultants, which used standard industry and FCC approved depreciation techniques. Staff reviewed the depreciation study by performing a detailed analysis of the life and salvage factors proposed by the company, comparing the company projections to the historical data and company plans provided with the study, and comparing company projections with industry trends and Oregon small telecommunications company guidelines for similar properties. Where historical data or company plans did not support company projections, Staff performed its own analysis using the company data and industry projections to develop life and salvage projections.

Staff’s review resulted in overall agreement on most asset accounts. However, Staff took a more conservative view than PTI on how quickly competition will drive modernization of the local network. During a settlement conference on December 10, 1997, Staff and the company were able to resolve all their differences and to reach agreement on all depreciation factors.

PTI had requested an increase in annual depreciation expense of $2,783,842. Agreements reached between Staff and the company, reflected in the stipulation, reduced the request for increased depreciation expense to $1,395,600. This change in depreciation accrual will raise the PTI composite depreciation expense from the current 6.7 percent to 7.3 percent, an increase of 8.7 percent. Staff and PTI agree that the new rates be made effective January 1, 1997.

We have reviewed the stipulation and the supporting testimony. We find that the stipulation is fair and reasonable and should be approved.

ORDER

IT IS ORDERED that the stipulation between PTI and Staff, appended to this order as Attachment A, be approved.

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 in 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(2). A party may appeal this order to a court pursuant to applicable law.