HomeMy WebLinkAbout47-Public Hearing
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In The Matter Of The Application Of
National Bus Traffic Association, Inc." Agent
Acting For And On Behalf Of
American Buslines, Inc., And
Trailways Lines, Inc., For Authority
To Increase California Intrastate
Passenger Fares Pursuant To Section 454
Of the Public utilities Code
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NOT ICE
You are hereby notified that on June 2nd, 1986,
Trailways Lines, Inc., and American Buslines, Inc., filed
Application with the Public Utilities Commission, State of
California, to increase Passenger Fares by approximately 13%,
which includes the 5% Insurance Surcharge granted by the
Commission in Decision No. 86-04-039, issued April 2nd, 1986.
These increases are requested to offse~ increased
costs incurred by said Companies.
This Notice is served pursuant to Rule 24 of the
Rules of Practice and Procedure of the California Public
utilities Commission. Pursuant to said Rule, a copy of the
Application and related Exhibits will be furnished by
Applicants upon written request therefor addressed to:
Mr. Lawrence W. Harlow,
President & Chairman
National Bus Traffic Association, Inc., Agent
506 South Wabash Avenue
Chicago, Illinois 60605
Agent For
American Buslines, Inc., and
Trailways Lines, Inc.
Dated:
June 2nd, 1986
By:
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Lawrence W. Harlow
President & Chairman
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Decision
86-06-008
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June 4, 1986
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BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
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Investigation on the Commission's )
own motion into the rates, tolls, )
rules, charges, operations, costs, )
separations, practices, contracts, )
service, and facilities of GENERAL)
TELEPHONE COMPANY OF CALIFORNIA, )
a California corporation; and of )
all the telephone corporations )
listed in Appendix A, attached )
hereto. )
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Application of General Telephone
Company of California, a corpora-
tion, for authority to increase
certain intrastate rates and
charges for telephone service.
Application 83-07-02
(Filed July I, 1983)
1.83-08-02
(Filed August 3, 1983)
OPINION MODIFYING DECISION (D.) 85-12-081
D.85-12-081 authorized General Telephone Company of
California (General) a $55.3 million annual increa~e of which
$11,730,000 was for financial attrition.
With resfect to financial
attrition, Conclusions of Law 5 and 6 state:
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"5. This proceeding should remain open to review
General's eOtbedded cost of debt.
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"6. General's attrition year increase shbuld be
authorized subject to refund pending resplution of
the effect of General's embedded cost of, debt on
its attrition year revenue requir~ment."' (Mimeo.
pg. 27.)
Furthermore, Ordering Paragraph 2 states, in part:,
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"2. Revised rates shall be subject to refund
pending review of General's cost of embedded debt
and corresponding adjustments to General's
attrition year revenue requirement." (Mimeo.
pg. 28.)
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A.83-07-02, 1.83-08-02
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General petitioned to modify D.85-12-081 by deleting the
above Conclusions of Law 5 and 6 and Ordering Paragraph 2.
TURN petitioned to modify the decision by reducing the
financial attrition by $1,126,000, to reinstate a $6 million Central
Office Switching Equipment (COSE) purchasing penalty, and by
requiring that any 1987 attrition filing by General be made a part of
this application and set for hearing.
TURN's arguments with respect to the COSE penalty simply
repeat arguments which were considered and rejected in D.85-12-081. We
will reject them again here. Similarly, its argument with respect to
the capitalization ratios restates TURN's prior arguments and will be
rejected.
Lastly, if General files a 1984 attrition increase, it must
be filed under this application and TURN will receive notice of it.
If such a filing is made, we will consider at that time whether
hearing is necessary rather than modify D.85-12-081 now to provide for
such a contingency.
The award of $11.7 million for financial attrition was
intended to reflect the increase in General's weighted cost of capital
due to the increase in its common equity ratio from 43.3% to 47.4%.
The request was granted with the attrition allowance subject to refund
should a review of General's current cost of embedded cost of debt
justify a decrease in the attrition allowance. The $11.7 million
financial attrition revenue requirement was calculated Bathe product
of the difference in weighted coat of capital (12.95%-12.74%), the
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A.83-07-02, 1.83-08-02
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adopted rate base ($2,909,518,000), and the net-to-gross.multiplier
(1.917). This method is appropriate for the computation of
operational attrition, but not for the computation of financial
attrition where the effect of debt interest on income taxes and the
related revenue requirement must be taken into consideration. As
shown in General's petition for modification, the financial attrition
revenue requirement should have been $22,112,000 instead of the
approved $11,730,000. Recomputing the financial attrition requirement
to reflect the decrease in the embedded cost of long-term debt from
11.00% to 10.45% and the cost of short-term debt from 10.00% to 8.00%
decreases the financial attrition revenue requirement by $9,165,000.
Deducting this amount from the above $22,112,000 leaves $12,947,000
or $1,217,000 more than the authorized amount. The Commission staff
has reviewed the above computations and finds them to be correct.
General does not propose that the Commission increase the
amount awarded in D.85-l2-081 to offset this revenue requirement
shortfall because of the public irritation and confusion that would
result from another increase in its billing surcharge. Instead it
requests that D.85-12-081 be modified by deleting Ordering Paragraph
2, Conclusions of Law 5 and 6, and related discussion on page 24 of
the decision. Under the circumstances, General's position does not
appear unreasonable. Consequently, upon reconsideration of the
record, we conclude that General's request for modification of
D.85-l2-08l should be granted.
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A.83-07-oi, 1.83-08-02 ALJ/NRJ/ek/rmn *
FindinRs of Fact
1. General has petitioned to modify D.85-l2-081 to delete the
provision that rates be subject to refund pending review of General's
embedded cost of debt and corresponding adjustments to General's
attrition year revenue requirement.
2. TURN has petitioned to modify D.85-12-081 to retain a $6
million COSE penalty, to reinstate the capital ratios for short-term
debt and preferred stock adopted in D.82-04-028 and to require
hearing for any attrition filing made for 1987.
3. General's original showing on financial attrition contained
a substantial error resulting in a revenue requirement of $11,730,000
instead of the correct $22,112,000.
4. General's embedded cost of long-term debt has decreased
from 11.00% to 10.45% and the cost of short-term debt has decreased
from 10.00% to 8.00%, decreasing the financial attrition revenue
requirement by $9,165,000.
5. General does not propose to recover any shortfall in the
amount of financial attrition authorized by D.85-l2-08l.
6. The staff has verified General's new calculations, finds
them correct and recommends that General's petition for modification
be granted.
7. TURN's petition for modification largely restates its
arguments at hearing which were not adopted by D.85-l2-08l.
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