ORDER NO. 99-383

ENTERED JUN 16 1999

This is an electronic copy. Appendices and footnotes may not appear.

OF OREGON

UI 56 (13)

DISPOSITION: SUPPLEMENTAL APPLICATION APPROVED WITH CONDITIONS

On March 1, 1999, the Commission received an application from U S WEST Communications, Inc., (Company), filed pursuant to ORS 759.375 and ORS 759.390, requesting authority to enter into an amendment to a lease agreement with U S WEST, Inc., concerning the 1200 Landmark Tower facility.

Based on a review of the application and the Commission’s records, the Commission finds that the application satisfies applicable statutes and administrative rules. At its Public Meeting on June 8, 1999, the Commission adopted Staff’s recommendation to approve the application with conditions. Staff’s recommendation is attached as Appendix A and is incorporated by reference.

Jurisdiction

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

Affiliation

An affiliated interest relationship between U S WEST Communications, Inc., and U S WEST, Inc., exists under ORS 759.010.

Applicable Law

ORS 759.390 requires telecommunications utilities to seek approval of contracts with affiliated interests within 90 days of 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 759.390.

ORS 759.390(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 all the financial aspects of the contract for ratemaking purposes. The Commission may reserve that issue for a subsequent proceeding.

Ratepayers should not be harmed by approval of this application.

CONCLUSIONS

The Company is a telecommunications utility subject to the jurisdiction of the Commission.

An affiliated interest relationship exists between U S WEST Communications, Inc., and U S WEST, Inc.

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

The application should be granted.

ORDER

IT IS ORDERED that the supplemental application of U S WEST Communications, Inc., for authority to enter into an amendment to a lease agreement with U S WEST, Inc., is granted, subject to the conditions stated in Appendix A.

 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.

REGULAR AGENDA CONSENT AGENDA X EFFECTIVE DATE

 DATE: May 18, 1999

TO: Bill Warren through Marc Hellman and Mike Myers

FROM: Marion Anderson

SUBJECT: UI 56 (13) - U S WEST Communications, Inc. (USWC) Supplemental Application for Approval of an Amendment to a Lease Agreement with U S WEST, Inc. (USWI), an Affiliated Interest

SUMMARY RECOMMENDATION:

I recommend approval with conditions.

 DISCUSSION:

USWC made this filing in accordance with ORS 759.390 on March 1, 1999. USWC is a wholly owned subsidiary of U S WEST, Inc. and thereby affiliated under ORS 759.010.

The existing lease period runs from November 1992 through May 2003. This supplemental application will reduce annual total company charges by $617,728.

PERTINENT ISSUES:

I have investigated the following issues to determine if the agreement is fair and reasonable, and not contrary to the public interest.

1. Scope of Services

There is a decrease in the square footage leased at 1200 Landmark Tower,
floors 6-8, in Omaha, Nebraska from 58,229 to 19,500.

2. Transfer Pricing Methods and Cost Allocations

Staff and USWC agreed to a lease rate of $15.95 per square foot in Order No.
96-179.

3. Determination of Public Interest Compliance

Commission approval given in Order No. 96-179 is unaffected.

4. Records Availability, Audit Procedures and Reporting Requirements

I believe that detailed recommendation condition 1 affords the Commission adequate access to records and provides for the auditing of transactions between USWC and USWI.

CONCLUSIONS:

Based on an investigation and review of this application, my conclusions are as follows:

1. U S WEST Communications, Inc., is a regulated telecommunications company subject to the jurisdiction of the Public Utility Commission of Oregon.

2. An affiliated interest relationship exists between U S WEST Communications, Inc., and
U S WEST, Inc.

3. The application appears to be fair and reasonable and, as modified, not contrary to the public interest.

DETAILED RECOMMENDATION:

Based on the preceding discussion and conclusions, I recommend that U S WEST Communications, Inc.’s application presenting this shared space agreement amendment with U S WEST, Inc., be approved with the following conditions:

1. U S WEST Communications, Inc., shall provide the Commission access to all books of account, as well as all documents, data and records of U S WEST Communications, Inc., and U S WEST, Inc., that pertain to transactions between the two.

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

3. U S WEST Communications, Inc., shall notify the Commission in advance of any substantive changes to the agreement, including any material changes in any cost. Any changes to the agreement terms that alter the intent and extent of activities under the agreement from those approved herein shall be submitted for approval in an application for a supplemental order (or other appropriate format) in this docket.

4. All conditions of the stipulation of Order No. 96-179 are applicable.

cc: Phil Nyegaard

Kathy Miller