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GTC, Inc. v. Lisa Polak Edgar
SC06-1786
LET'S MOVE
ON TO OUR SECOND CASE IF WE MAY,
GTC.
>> MAY IT PLEASE THE COURT,
GOOD MORNING, YOUR HONOR, MY
NAME IS KEN HOFFMAN AND WITH ME
IS MARCIA RULE.
WE REPRESENT THE APEL LANTED IN
THE PROCEEDING, GTC, KNOWN AS
GT-COM, WHICH IS A SMALL, RURAL
INCUMBENT LOCAL EXCHANGE
TELEPHONE COMPANY.
GH-COM ELECTED PRICE CAP
REGULATION WHICH MEANS THAT IT
IS NOT SUBJECT TO TRADITIONAL
COST-BASED REGULATION BY THE
PSC --
>> I THINK WE'RE FAMILIAR WITH
THE OVERVIEW OF THIS.
MY CONCERN IS THAT I THINK
THERE IS MERIT TO CERTAIN
ASPECTS OF YOUR CLAIM,
PARTICULARLY AS IT RELATES TO
CAPITAL COST EXPENDITURE BUT
ARE YOU TAKING A GLOBAL
POSITION THAT ANYTHING THAT
OCCURS AFTER A STORM IS
RECOVERABLE, EVEN IF IT IS PART
OF YOUR NORMAL OPERATING
EXPENSES?
AND I THINK IT IS THATZZ##$$
ALL-OR-NOTHING APPROACH THAT
SEEMED TO THE THE -- BE THE
APPROACH AT THE PSC LEVEL AND
CONTINUES IN TERMS OF YOUR
BRIEFS TO BE, YEAH, WE OUGHT TO
GET IT IF -- IF IT OCCURS AFTER
THE STORM WE OUGHT TO GET IT.
THEY HAVE NO BUSINESS LOOKING
INTO WHETHER IT EXCEEDS OUR
NORMAL OPERATING COSTS OR NOT.
AND SO, IF YOU COULD CLARIFY
YOUR POSITION ON THAT, AND THEN,
YOU KNOW, GO ON.
>> YES, MA'AM.
>> OUR POSITION IS THAT THE
LEGISLATURE, VERY CLEARLY, SET
FORTH THREE CRITERIA.
FOR COST RECOVERY.
THE FIRST IS THAT THE COSTS
MUST BE INTRASTATE COSTS TO
REPAIR, RESTORE OR REPLACE
LINES, PLANTS OR FACILITY THAT
ARE DAMAGED BY YOU A HURRICANE.
SECONDLY, THE COSTS HAVE TO BE
VERIFIED.
AND THEN, THIRD, THE COMPANY
HAS TO SHOW THAT THE COSTS ARE
REASONABLE UNDER THE
CIRCUMSTANCES FOR THIS
PARTICULAR HURRICANE.
THOSE ARE THE ONLY THREE
CRITERIA.
NOW, THERE IS NO ISSUE IN THIS
APPEAL AS TO THE FIRST AND
SECOND ELEMENTS.
YOUR QUESTION, JUSTICE PARIENTE
I THINK GOES TO THE THIRD
ELEMENTARY AND -- ELEMENT AND
THE NOTION OF DOUBLE RECOVERY
AND WE BELIEVE THAT THE STATUTE
IS VERY CLEAR THAT THOSE TYPES
OF RATE-MAKING PRINCIPLES,
ADJUSTMENTS, ARE NOT APPLICABLE
IN THIS PARTICULAR --
>> SO YOU MENTIONED THE WORD
"DOUBLE RECOVERY."
SO THAT THE IDEA THAT THERE
WOULD BE A DOUBLE RECOVERY,
THAT IS, THAT IT IS ALREADY
COUGHED BY YOUR -- YOU KNOW,
MONTHLY RATES, SHOULD BE OF NO
CONCERN TO THE PUBLIC SERVICE
COMMISSION.
>> THAT'S RIGHT.
AND THE REASON IS -- JUSTICE
PARIENTE IS THAT IF YOU LOOK AT
WHAT THE LEGISLATURE DID IN
2005, IT PASSED TWO HURRICANE
COST RECOVERY STATUTES.
ONE FOR ELECTRIC COMPANIES THAT
ARE FULLY REGULATED, AND ONE
FOR TELEPHONE COMPANIES THAT WE
FILED UNDER.
THE ELECTRIC STATUTE
SPECIFICALLY HAS RATED-MAKING
ADJUSTMENTS WHICH ALLOW FOR
OFFSETS FOR NORMAL OPERATING
COSTS.
>> 366.82 --
>> 660.
RIGHT.
SO THE LEGISLATURE UNDERSTANDS
THAT A FULLY REGULATED COMPANY
LIKE AN ELECTRIC UTILITY, THAT
HAS RATE CASES, CAN ONLY
RECOVER ONCE.
IF IT SPENDS -- IF IT SPENDS A
THOUSAND DOLLARS ON A FACILITY
OR ON SOME LABOR THE THOUSAND
DOLLARS IS PUT INTO ITS RATES
BY THE PSC AND IS NOT ALLOWED
TO EARN THAT AGAIN AND WITH THE
TELEPHONE COMPANY THAT SELECTED
PRICE CAP REGULATION THE
COMPANY CAN DOUBLE RECOVERY,
TRIPLE RECOVER, CAN LOSE MONEY,
CAN MAKE MONEY.
--
>> WHAT DOES THE TERM -- SEEMS
TO ME THAT IF THAT IS THIS CASE,
THEN WHY WOULD THE LEGISLATURE
USE THE TERM ABOUT
REASONABLENESS.
WHAT DOES REASONABLENESS MEAN
IF YOU CAN CHARGE ALL OF THIS,
WHETHER OR NOT IT IS ACTUALLY
STORM-RELATED BECAUSE BASICALLY
THE PSC IS SAYING, SOME OF THIS
REALLY ISN'T STORM RELATED, IT
REALLY IS UPGRADES THAT YOU
WERE DOING AND THINGS LIKE
THAT.
SO WHAT DOES REASONABLE MEAN.
>> REASON -- THE STATUTE SAYS
REASONABLE UNDER THE
CIRCUMSTANCES FOR THE NAME --
MAIN TROPICAL SYSTEM AND WHAT
WE THINK THAT MEANS IS THAT IF,
FOR EXAMPLE, A HURRICANE COMES
IN AND LET'S SAY IT IS A LIGHT
ONE, A CENTRAL OFFICE HAS SOME
SHINGLES TORN OFF AND A FEW
WINDOWS BROKEN, GOT AWAY LUCKY,
IT WOULD BE UNREASONABLE UNDER
THE CIRCUMSTANCES FOR THAT
HURRICANE AND THAT DAMAGE TO
SPEND $300,000 FOR -- OR
WHATEVER THE COST MAY TO BE
REPLACE THE WHOLE CENTRAL
OFFICE, BECAUSE THE STATUTE
SAYS REASONABLE UNDER THE
CIRCUMSTANCES NORTH NAME
TROPICAL SYSTEM.
THAT IS NOT WHAT HAPPENED HERE.
>> LET'S TAKE FOR EXAMPLE, THE
REPLACEMENT OF COPPER WIRE BY
FIBER, CORRECT.
>> YES, MA'AM.
>> AND HOW IS THAT REASONABLE
UNDER THE CIRCUMSTANCES, SINCE
THERE WAS COPPER THERE AT THE
TIME THAT THE STORM CAME AND SO,
WHY WAS THE REPLACEMENT WITH
THE COPPER REASONABLE UNDER THE
CIRCUMSTANCES.
>> WELL, FROM THE COMPANY'S
PERSPECTIVE, IT WAS THE RIGHT
THING TO DO FROM A BUSINESS
STANDPOINT.
THE OLD COPPER WAS DESTROYED.
NO ONE, NO ONE WOULD REPLACE
COPPER CABLE -- [INAUDIBLE]
WITH NEW COPPER AND WE'VE
REPLACED IT WITH FIBER AND I
WANT TO POINT OUT, JUSTICE,
THAT AMOUNT THAT IS -- THAT
ADDITIONAL AMOUNT THAT IT COST,
WE ARE NOT -- IN THE APPEAL,
DID NOT PURSUE THAT IN THE
APPEAL WELL, ARE ONLY APPEALING
THE DENIAL OF OF THE COST FOR
OR INHOUSE LABOR AND CAPITAL
ASSETS AND THE FACT THE
COMMISSION OPPOSED AN OFFSET
FOR HIGH COST --
>> LET ME -- A QUESTION, YOUR
ARGUMENT IS REASONABLE, BUT AS
I KEPT GOING OVER THIS IT SEEMS
AS THOUGH WE HAD ISSUES WITH
REGARD TO PROOF OF SEGREGATING
THESE ITEMS OUT.
AND IT WAS ALMOST LIKE IT WAS
LUMP-SUMMED AND CERTAINLY IF
YOU GO THROUGH PENSACOLA'S
KNOCKED OUT AND YOU HAVE TO GO
IN AND REPLACE THE POLE SYSTEM
AND YOU USE YOUR OWN WORKERS TO
DO THAT, WELL, THAT IS FINE,
WHAT IS CONTEMPLATED AND IF YOU
DON'T SEPARATE THE COST OUT
FROM OTHER COSTS, THEN HOW CAN
SOMEONE ATTRIBUTE THIS STATUTE
TO DO THAT JUST TO REPAY THOSE
COSTS, AM I MAKING MYSELF
CLEAR.
>> I THINK SO.
>> AND THAT IS WHAT I KEPT
HITTING, AS I WAS GOING THROUGH
HERE, THAT JUST THE -- A LACK
OF PROOF IN SEGREGATING THESE,
AND TELL ME WHY THAT IS NOT
WHAT HAPPENED.
>> WELL, I THINK THAT -- I
THINK THAT IS WHAT HAPPENED.
WHEN IT CAME TO THE AMOUNT THAT
WE SAW FOR THE OVERHEAD AND THE
BENEFITS THAT WERE ASSOCIATED
WITH THE ACTUAL LABOR.
SO, WE DIDN'T APPEAL THAT.
THE COMMISSION FOUND THAT THOSE
--
>> HOW ABOUT THE ACTUAL LABOR,
THOUGH?
WERE YOU -- DID YOU PUT THE
HOUR FOR HOUR IN ON THE -- ON
THE INSTALLING, THE UNDERGROUND
LINE DOWN WHEREVER IT WAS AND
JUST HOUR FOR HOUR, THAT IS ALL
SEPARATED OUT.
>> THAT IS -- THAT IS MY
UNDERSTANDING.
WE DID.
INVOICED THEM AND BATCHED THEM
BY WORK ORDERS FOR SPECIFIC
GEOGRAPHIC AREAS, YES.
HOUR BY HOUR AND ITEMIZED THE
AMOUNT OF LABOR.
BUT THE COMMISSION REALLY
DIDN'T HAVE A PROBLEM WITH THAT.
WHAT THE COMMISSION, NO ONE IS
SAYING IN THIS APPEAL THAT THIS
MONEY WE SAY WE SPENT WASN'T
SPENT.
NO ONE IS SAYING THAT.
THESE AMOUNT ARE VERIFIED.
NO ONE IS SAYING THAT THEY
DIDN'T OCCUR DIRECTLY BECAUSE
OF HURRICANE DENNIS.
THE ISSUE HERE IS DOUBLE
RECOVERY.
>> LET ME GET BACK TO THAT
QUESTION OF DOUBLE RECOVERY.
YOU ARGUE THAT THE LEGISLATURE
ADOPTED TWO DIFFERENT STATUTES,
ONE FOR TELEPHONE AND THE OTHER
FOR ELECTRIC COMPANIES.
AND YOU ARGUE THAT YOU CAN BE
ALLOWED DOUBLE RECOVERY BECAUSE
YOU ARE -- YOU ARE A PRICE CAP
COMPANY AND NOW THE LEGISLATURE
KNEW THAT THEY HAD DIVIDED THE
COMPANIES INTO PRICE CAP BE A
RATE OF RETURN GIVING PEOPLE
THE OPTION SINCE 1995 I BELIEVE
OF GOING TO PRICE CAP.
SO, IF THE LEGISLATURE WANTED
TO HAVE DIFFERENT STANDARDS FOR
PRICE CAP COMPANIES AND RATE OF
RETURN COMPANIES, THEY COULD
HAVE RIDDEN TWO DIFFERENT SUB
SECTIONS OF -- WRITTEN TWO
DIFFERENT SUB SECTIONS OF THE
STATUTE, DEPENDING ON WHICH ONE
YOU WERE BUT THEY DIDN'T.
>> JUSTICE CANTERO, ACTUALLY I
THINK THEY DO BECAUSE THE
TICKET, THAT GAVE WAY INTO
HURRICANE COST RECOVERY FOR THE
COMPANIES AND IT IS VIRTUALLY
ALL OF THEM THAT HAVE ELECTED
PRICE CAP REGULATION IS UNDER
THIS STATUTE THAT PROVIDES THIS
SORT OF QUICK AND DIRTY
EXPEDITED MECHANISM THAT WAS
PASSED IN 2005.
IF YOU HAVEN'T ELECTED PRICE
CAP REGULATION, AT THE PSC YOU
ARE NOT ALLOWED IN BUT YOU ARE
-- YOU ARE ALLOWED TO FILE A
RATE CASE AND SOY YOU ARE TAKEN
CARE OF ON THAT SIDE OF THE
STATUTE AND SO ACTUALLY THE
STATUTE DOES PROVIDE TWO WAYS,
DEPENDING ON WHICH TYPE OF
COMPANY YOU ARE, FOR A COMPANY
TO RECOVER THE HURRICANE COSTS.
>> ONE --
>> I'D LIKE TO GO BACK TO THE
LABOR ISSUE, YOU SAID YOU ARE
APPEALING THE DENIAL OF THE
INHOUSE LABOR BUT YOU AGREED
NOT TO APPEAL THE ASSOCIATED
OVERHEAD.
IF I'M UNDERSTANDING, THOUGH,
WHAT IS ALLOWED, IF YOU
CONTRACTEDDED WITH THIRD
PARTIES TO DO REPAIR, THAT WAS
ALLOCATED AND ALLOWED, CORRECT.
>> YES, MA'AM.
>> WHAT I'M UNDERSTANDING AND
THIS IS SORT OF THE QUESTION,
IS THAT REASONABLE UNDER THE
CIRCUMSTANCES, YES, YOUR PEOPLE
WENT OUT AND DID THIS REPAIR
BUT THERE WASN'T ANY UNUSUAL OR
EXTRAORDINARY OVER TIME
ASSOCIATED OR -- COMMISSION
SAYS THEY WOULD HAVE RECEIVED
THAT.
AND THESE WERE PEOPLE THAT WERE
ON THE SALARY.
AND SO THE LABOR COSTS FOR THE
YEAR WERE ESSENTIALLY NO
DIFFERENT THAN THEY WOULD HAVE
BEEN ACTUALLY -- AFTER THE
STORM AND THAT'S -- IF YOU HAD
SHOWN THAT THEY WERE DIFFERENT,
THEN THE COMMISSION WOULD HAVE
ALLOWED IT.
SO, IS THAT CORRECT, THAT IS,
THAT THERE -- THAT YOUR
CONTROLLER AND THE PSC FOUND
THAT -- AS FAR AS INHOUSE LABOR,
EVEN THOUGH THOSE PEOPLE MAY
HAVE PHYSICALLY GONE OUT THERE,
THOSE LABOR COSTS ARE NO
DIFFERENT THAN IF THERE HADN'T
BEEN A STORM?
>> YES.
BUT IT IS BECAUSE --
>> I GUESS THAT IS WHERE THE
QUESTION, BECAUSE WE ARE STILL
-- THERE IS SOME RESPONSIBILITY
HERE IF IRATE IS BEING IMPOSED,
THAT IS WHAT WE ARE TALKING
ABOUT, NOT ABOUT WHETHER YOU
CAN GET IT BACK FROM YOUR
INSURANCE COMPANY OR SOME
FEDERAL FUND, THIS IS WHETHER
YOUR CUSTOMERS CAN BE CHARGED,
HOW IS THAT REASONABLE UNDER
THE CIRCUMSTANCES OF THE NAMED
STORM OR ISN'T THAT SOMETHING
THE PSC CAN DECIDE, IF THERE
AREN'T ANY ADDITIONAL --
ADDITIONAL LABOR COSTS ASOIFTED
WITH THIS RE-- REPAIR IT'S NOT
REASONABLE UNDER THE
CIRCUMSTANCES TO RECOVER IT.
WHY WOULD THE LEGISLATURE WANT
YOU TO HAVE A DOUBLE RECOVERY?
>> BECAUSE WE ARE A COMPETITIVE
COMPANY.
WHETHER SOMETHING IS REASONABLE
UNDER THE CIRCUMSTANCES AND
THEN IT SAYS FOR THE NAME
TROPICAL SYSTEM, IT CAN ONLY
MEAN -- GO TO WHETHER THE
AMOUNT YOU SPENT WAS REASONABLE
FOR WHAT HAPPENED AS A RESULT
OF THAT HURRICANE.
WE ARE -- WHEN YOU LOOK AT THIS
DOUBLE RECOVERY ISSUE, YOU HAVE
TO KEEP IN MIND THAT THE PSC
DOES NOT REGULATE US.
WE DO NOT HAVE RATE CASES.
THE INHOUSE LABOR WE JUST
TALKED ABOUT, THE WORK THAT
THOSE EMPLOYEES DID, THEIR
NORMAL WORK DOESN'T GO AWAY,
THEY HAVE TO GO BACK AND DO
THEIR NORMAL WORK WHILE
PROVIDING THE EC DIET
RESTORATION.
>> THAT IS -- BUT IF YOU COULD
PROVE, THEREFORE, SOMETHING
DIDN'T GET DONE, I MEAN, THAT
IS -- WHERE JUSTICE LEWIS WAS
SAYING ABOUT FAILURE OF PROOF,
I THINK THAT IS WHAT SEEMS TO
BE MISSING FROM THIS RECORD, IS
-- OKAY.
HERE'S THE COST BUT, NO
EXPLANATION OF WHAT SUFFERED AS
A RESULT OF THAT OCCURRING.
>> JUSTICE PARIENTE, I THINK --
I DON'T KNOW THAT WE WOULD BE
REQUIRED TO SHOW WHAT SUFFERED.
UNDER THE STATUTE, WE JUST HAVE
TO SHOW HOW MUCH WE SPENT THAT
IT WAS SPENT TO REPAIR, REPLACE
OR RESTORE LINES, PLANTS OR
FACILITIES FOR -- KAFD BY A
HURRICANE AND THAT THE AMOUNT
WAS REASONABLE UNDER THE
CIRCUMSTANCES, FOR THAT
HURRICANE.
AND NOW, WE ARE NOT EARNINGS
REGULATED.
THIS STATUTE COULD NOT HAVE
BEEN INTENDED TO YIELD A RESULT
THAT, IF THEY COMPETITIVE PHONE
COMPANY, WHICH TAKES THE CHANCE
THAT IT MAY LOSE CUSTOMERS, IF
IT COMES IN AND GETS THIS MONEY,
AND IMPOSES IT RIGHT, BECAUSE
IT FACES COMPETITION.
THE STATUTE COULD NOT HAVE BEEN
INTENDED TO SAY, OKAY.
IF YOU ARE MAKING MONEY, YOU
DON'T GET THIS.
>> WHAT DO YOU THINK, THEN,
REALLY IS THIS PURPOSE OF THE
STATUTE?
IT DOESN'T SEEM TO ME THE
PURPOSE OF THE STATUTE IS TO
LET YOU JUST GO OUT AND GET
MONEY FROM ANY SOURCE, FOR
THESE HURRICANE DAMAGES, SEEMS
TO ME THE PURPOSE OF THE
STATUTE IS TO ATTEMPT TO DRY TO
MAKE YOU WHOLE IF YOU HAVE TO
SPEND ADDITIONAL MONEY BECAUSE
OF HURRICANE DAMAGE.
AND SO, ISN'T -- WHEN THE
PUBLIC SERVICE COMMISSION
LOOKED AT THIS, ISN'T THAT WHAT
THEY WERE REALLY LOOKING AT?
WHAT MONIES DID YOU HAVE TO
SPEND BECAUSE OF THE HURRICANE
DAMAGE AND ONLY THAT TO BE
PASSED ON TO YOUR CUSTOMERS.
>> I THINK THAT IS EXACTLY WHAT
THEY LOOKED AT, JUSTICE QUINCE
AND I THINK ERRONEOUSLY SO AND
THANK THEY EXCEEDED THEIR
JURISDICTION BY REWRITING THE
STATUTE AND INCORPORATING THE
NOTIONS THAT YOU U.S.
REFERENCED --
>> ARE YOU -- EXCUSE ME.
GO AHEAD.
>> BUT IT SEEMS TO ME THAT THAT
IS INCLUDED IN THE WHOLE NOTION
THAT THIS STATUTE IS BASED ON
REASONABLE EXPENSES BY YOUR
COMPANY.
>> NO, MA'AM.
THE STATUTE SAYS REASONABLE
UNDER THE CIRCUMSTANCES FOR THE
NAME TROPICAL SYSTEM.
-- NAMED TROPICAL SYSTEM AND I
THINK THE APPROACH THE
COMMISSION TOOK AND WHAT YOUR
QUESTION SUGGESTS IS WE COULD
TAKE THE WORDS FOR THE NAME
TROPICAL SYSTEM OUT OF THE
STATUTE.
>> LET ME -- [INAUDIBLE].
>> WELL, IT IS SORT OF THE SOME
OF WHAT YOU ARE SAYING IS THAT
THIS COMMISSION AND THIS COURT
SHOULD NOT LOOK AT THIS THROUGH
THE EYES OF A RATE CASE.
IS THAT RIGHT.
>> YES, SIR.
>> BECAUSE THIS IS NOT A SET --
SETTING RATES.
>> THIS IS NOT SETTING RATES.
>> NOT SETTING THE RATES.
WHAT ARE WE DOING IN THE COURT?
>> YOU ARE --
>> WHY ISN'T THE COURT, THE
JURISDICTION IN THIS PROCEEDING
IN THE DISTRICT DISTRICT COURT
RATHER THAN THIS COURT.
>> BECAUSE THIS IS AN ISSUE
THAT INVOLVES THE DENIAL OF OUR
REQUEST TO ADD A CHARGE THAT IS
AUTHORIZED UNDER THE STATUTE
AND I THINK THAT THAT PLACES
JURISDICTION WITH THE COURT.
>> THE END RESULT, THE END
RESULT OF THE COMMISSION'S
DECISION IS THAT WE WILL
RECOVER THE MONEY IF WE TAKE
THE INEFFICIENT APPROACH OF
TAKING OUR INHOUSE FOLKS AND
KEEPING THEM ON THEIR NORMAL
STUFF, IF YOU WILL, THEIR
NORMAL TASKS AND SPENDING A
BUNCH OF NEW MONEY TO HIRE A
THIRD PARTY PARTY AND BRINGING
THEM IN, NOT FAMILIAR WITH OUR
SYSTEM, SPENDING THAT MONEY AND
WE'RE GOING TO GET THAT MONEY,
UNDER THE COMMISSION'S
RATIONALE.
>> YOU WOULDN'T WANT TO DO THAT
ANYWAY UNLESS ARE GOING TO BE
PAYING OVERTIME TO YOUR
EMPLOYEES BECAUSE BECAUSE YOU
WILL BE SPENDING MONEY, YOU MAY
NOT RECOVER LATER ON AND YOU --
YOUR PRICE CAP COMPANY, YOU ARE
WORKING ON REDUCING YOUR
EXPENSES, AND WHY YOU WOULD
HAVE -- WHY WOULD A PRICE CAP
COMPANY DELIBERATELY GO OUT AND
HIRE OTHER PEOPLE WHEN THEY
COULD DO IT INHOUSE WITHOUT
OVERTIME NOT KNOWING IF THEY'LL
RECOVER THE EXPENSES LATER.
>> WELL, THAT IS THE APPROACH
WE TOOK, JUSTICE CANTERO.
>> ALL RIGHT.
AND NOBODY IS HERE SAYING IT
WAS AN UNREASONABLE APPROACH
THAT YOU TOOK.
THE ONLY QUESTION IS WHETHER
YOU ARE ALLOWED DOUBLE RECOVERY
AND THE ONLY THING THE COURT
SEEMS TO BE CONCERNED ABOUT.
>> JUSTICE CANTERO YOU HAVE TO
KEEP IN MIND, THE WORD DOUBLE
RECOVERY, TRIPLE RECOVERY, YOU
KNOW, STARBUCKS CAN RECOVERY
THREE TIMES ITS COSTS WHEN IT
SELLS YOU A CUP OF COFFEE AND
WHEN IT PRICES IT HE TIE YOU GO
TO DUNKIN' DONUTS OR SOMEWHERE
ELSE TO GET YOUR COFFEE.
DOUBLE RECOVERY ASSUMES THE
NOTION THAT RECOVERY THAT YOU
CAN ONLY RECOVER ONCE BECAUSE
YOU ARE FULLY REGULATED.
THIS COMPANY IS NOT FULLY
REGULATED.
>> BUT IT IS COST REGULATED,
THAT'S WHY YOU HAD TO GO TO THE
PSC, RIGHT, THE ABILITY TO PASS
THE COSTS ON.
>> OUR ABILITY TO PASS THE
COSTS ON --
>> REGULATED.
>> WE REQUIRE -- WE ARE NOT
REGULATED.
>> BUT REQUIRED TO APPROVE --
>> PERMISSION FROM THE PSC.
>> AND IT SAYS -- GIVE ME YOUR
DISAGREEMENT, THEY ARE SAYING
THE STATUTE WASNETICKED TO
DEFRAY ADDITIONAL COSTS KAFD BY
EXTRAORDINARY CIRCUMSTANCES.
DO YOU AGREE OR DISAGREE.
>> WE DISAGREE.
THIS STATUTE WAS -- [INAUDIBLE]
PROVIDE AN EXPEDITED,
NONREGULATED APPROACH, FOR
COMPANIES LIKE OURS, THAT HAVE
A CARRIER OF LAST RESORT
OBLIGATION, SUBJECT TO
COMPETITION HAVE TO MACK A
BUSINESS DECISION IF THEY ARE
GOING TO IMPOSE THE CHARGE AND
IF THEY INCREASE THEIR RATES
TOO MUCH, WIRELESS COMPANIES,
CABLE COMPANIES, COMPETITIVE
LAND LINE PHONE COMPANIES WILL
COME IN AND TAKE THE CUSTOMERS.
>> JUSTICE --
>> BEFORE YOU SIT DOWN ON THE
ISSUE OF THE SUBSIDY, IS IT
YOUR POSITION THAT IF YOU HAD
RECEIVED VURNS -- IN OTHER
WORDS, INSURANCE HAD REIMBURSED
YOU, $100,000, THE PSC WAS NOT
ALLOWED TO TAKE IT INTO
CONSIDERATION.
>> THAT'S RIGHT.
NOW THE TESTIMONY SHOWS --
>> THAT'S CORRECT THAT, NO, IF
YOU HAD GOTTEN ONE AND
INSURANCE COMPANY, AND THAT IS
WHY YOU SAY ALSO THE SUBSIDY IS
-- SHOULD NOT HAVE BEEN OFFSET.
>> IF I MAY, JUSTICE PAIR
YAENLT WE WOULDN'T HAVE PURSUED
IT -- PARIENTE, WE WOULDN'T
HAVE PURR SIDE IT IF WE WERE
PAID INSURANCE MONIES.
>> YOU FEEL LIKE YOU COULD
HAVE?
>> NO, MA'AM -- YES.
THE STATUTE PROVIDES ONE
OFFSET.
AND THAT IS -- NOT HAVE MONEY
ALREADY IN A STORM FUND.
WHAT HAPPENED WITH THE HIGH
COST RECOVERY FUND, I THINK
WHAT YOU ARE RAISING IS, YOU
CAN'T SQUARE WHAT HAPPENED HERE
WITH A LEVEL-3 DECISION THE APP
LEES CITE IN THEIR CASE AND THE
LEVEL 3 CASE, A COMPETITIVE
PHONE COMPANY SAID, YOU KNOW,
WE HAVE RENTAL REVENUES AND
THEY SHUNTS COUNT WHEN YOU
CALCULATE REGULATORY ASSESSMENT
FEES AND THE PSC SAID THERE IS
ONLY TWO EXCLUSIONS IN THE
STATUTE BS ONE FOR IN STATE
REVENUES AND THE FOR WHAT WE
PAY OTHER PHONE COMPANIES AND
THE CO-LOCATION REVENUE COUNT.
THAT WAS APPEALED, AND THE
COURT AFFIRMED AND HERE, THERE
IS ONLY ONE COST --
>> [INAUDIBLE].
>> HAVE MONEY SET ASIDE IN THE
STORM RESERVE FUND AND WHAT THE
COMMISSION DID, WE THINK,
UNLAWFULLY WAS REWROTE THE
STATUTE AND ADDED A SECOND
OFFSET, FOR THE MONEY THAT
WOULD COME IN, PROJECTED TO
COME IN UNDER THE HIGH COST
PROGRAM.
>> OUT OF YOUR --
>> HOW MUCH TIME DO I HAVE
LEFT.
>> 17 SECONDS.
>> THANK YOU, I'LL SAVE MY 17!
>> I'M DAVIS SMITH REPRESENTING
THE FLORIDA PUBLIC SERVICE
COMMISSION AND WITH ME AT
COUNSEL TABLE IS PATTY
CHRISTIANSEN FROM THE
DEPARTMENT OF PUBLIC --
>> I'LL PRESENTED THE ARGUMENT.
>> LET ME ASK YOU, MY CONCERN
AND YOU MAY SAY THAT IS NOT
APPLICABLE IN THE CASE BUT
SEEMS TO ME IF THE STATUTE IS
DESIGNED TO DO ANYTHING, IT IS
DESIGNED TO ALLOW REIMBURSEMENT
WHEN -- BECAUSE OF A YOU
HURRICANE, A COMPANY'S
TELEPHONE LINES ALL GO DOWN AND
HAVE TO REPLACE THEIR TELEPHONE
LINES, AND SEEMS TO ME THAT
THIS IS THE CASE WHETHER OR NOT
THOSE TELEPHONE LINES HAVE BEEN
FULLY DPREERBIATED, THE WHOLE
PURPOSE TO SAY, IF YOU HAVE
TELEPHONE LINES THAT A
HURRICANE IS -- HAS KNOCKED
DOWN YOU NEED REPLACE THEM AND REASONABLE
COSTS UPPER THE STATUTE.
>> DOES THE COMMISSION
DISAGREE WITH THAT?
>> THE COMMISSION DOESN'T
DISAGREE THAT, THEY
SHOULDN'T ABLE TO RECOVER
THOSE COSTS FOR PUTTING IN A
NEW LINE, BUT THE QUESTION
IS, IS IT NORMAL COST THAT
THEY WILL BE DEPRECIATING
OVER A NUMBER OF YEARS?
>> WHETHER THEY SHOULD
DEAPPRECIATE IT OR NOT IT
MAY BE KINING ISSUE LATER ON
IF THE PREVIOUS TELEPHONE
LINES HAVE BEEN FULLY
DEPRECIATED ALREADY MAYBE
THE ANSWER IS, YOU CAN'T
DEPRECIATE THE NEW ONES
BECAUSE THEY ARE REPLACING
THE FULLY DEPRECIATED ONES
IT DOESN'T ANSWER THE
QUESTION OF WHETHER THEY
SHOULD RECOVER THE COST IN
THE FIRST PLACE.
>> THE COMMISSION LOOKS AT
IN THE WAY, NORMAL COUNSEL
COSTS ARE MATCHED TO EXPENSE
THAT IS PARCELED OUT OVER A
NUMBER OF YEARS THEY, THEY
HAVE CAPITALIZED THE COST IN
THE BOOKS, THERE IS NO
QUESTION ABOUT THAT.
THE COUNSEL THOUGHT THE
COMMISSION WERE NOT GOING TO
ALLOW TO YOU RECOVER AGAIN
ARE ALREADY ON THEIR BOOKS
IN THEIR ACCOUNTING SCHEMES
COUNTED FOR AND THEY WILL
RECOVER THROUGH THEIR RATE.
>> LET ME FOLLOW-UP.
THEY WILL RECOVER IT BECAUSE
THEY HAVE DEPRECIATED OUT,
BUT DOES IT MATTER ON THE
TERMS OF THE PSE'S VIEW AS
TO WHETHER THE ASSET HAD
ALREADY BEEN FULLY
DEPRECIATED OR WHETHER IT
WAS JUST LAST YEAR THEY
FULLY PUT NEW POLLS IN AND
THEY SPENT, YOU KNOW, HALF
MILLION DOLLARS UPFRONT TO
PAY FOR IT, AND NOW, NEXT
YEAR, THEY ARE NOW HAVING TO
PAY THAT EXACT -- DOES IT
MATTER AT ALL IN YOUR PSE'S
ANALYSIS IF
>> WELL, IT IS THE SAME
QUESTION OF DOUBLE RECOVERY,
IF THE COMMISSION HAD
ALLOWED THEM THOSE EXPENSES
TO BE RECOVERED IN ONE YEAR,
THEY ARE GOING TO RECOVER IT
AGAIN IN THEIR NORMAL RATE,
SO THE RATE PAYERS WOULD BE
PAYING TWICE LIKE WOULD YOU
FOR OTHER EXPENSES THAT THEY
NORMALLY INCUR.
>> THEY SAY --
>> JUST ONE SECOND.
HER QUESTION ASSUMES THEY
WOULD HAVE NOT OTHERWISE
REPLACED THE TOLLS OR LINES
THAT YEAR.
THEY SUSTAIN --
>> CORRECT.
I UNDERSTAND.
>> THE LOSS AT ONE TIME,
THAT IS WHAT SHE IS ASKING.
>> THE HURRICANE CAUSED THEM
TO HAVE TO DO IT.
IT IS MATTER OF TIMING.
THE QUESTION IS:
INTERNALS OF, YOU KNOW, THE
RECOVERY, THE COST, IS IT
NORMAL COST OR IS NOT?
IT IS A NORMAL COST.
THEY DIDN'T SUFFER ANY
ADDITIONAL LOSS ON THE
LIGHTS BECAUSE THEY WERE
FULLY DEPRECIATED EXCEPT FOR
ONE LITTLE PIECE THEY DIDN'T
INCUR A SPECIFIC LOSS
RELATED TO THAT.
THIGH IS WHERE WE ARE HAVING
PROBLEMS WITH IT.
WE ARE THINKING THAT THEY
WOULDN'T HAVE DONE THIS.
THEY WOULDN'T HAVE DONE,
THEY WOULDN'T HAVE HAD A
REPLACED PEDESTALS OR
WHATEVER IF THEY HAD NOT
BEEN DESTROYED.
THEY MAY HAVE DECIDED THEY
WERE GOING TO DO IT IN FIVE
YEARS, THEY MAY HAVE DECIDED
THEY WOULD FINANCE IT, I
MEAN, I GUESS, SO, IT
DOESN'T SEEM LIKE IT
MATTERED IF YOU SAY, WELL,
THEY SHOULDN'T HAVE PAID IT
ALL UPFRONT, YOU KNOW, THEY
SHOULD HAVE THEMSELVES
FINANCED THIS OPERATION, SO
THEY DIDN'T PAY IT ALL IN
ONE YEAR OR SOMETHING LIKE
THAT.
BUT IT SEEMS AGAIN THAT THE
COMMISSION HAS GOTTEN THE
WHOLE OPPOSITE WAY TO SAY,
KNOB OF THIS IS RECOVERABLE.
NONE OF THESE --
>> NO, NO.
FIRST OF ALL, THE COMMISSION
HAS ALLOWED CAPITAL EXPENSES
IN THE SPRINT CASE AND SOME
OF THE ELECTRIC CASES.
>> EXPLAIN THU WOULD WORK,
IN OTHER WORDS, WHY DIDN'T
ALLOW IT HERE?
>> I AM SORRY.
>> WHERE IS IT THAT YOU DO
ALLOW THE REPLACEMENT OF THE
LINES OR THE POLES OR WHAT
JEFF, WHY WASN'T THAT
ALLOWED HERE?
>> THEY HAVE ALLOWED, YOU
KNOW, PARTICULARLY
EXTRAORDINARY EXPENSE BEYOND
THE NORMAL COST OF ANY
INVESTMENT AND I WILL ANSWER
YOUR QUESTION.
>> YOU ARE NOT HELPING.
I AM TRYING TO UNDERSTAND, A
POLE IS KNOCKED DOWN, RIGHT?
THAT POLE WAS JUST PUT UP
LAST YEAR.
NOW THEY GO OUT.
THEY HAVE TO SPEND $50,000
TO PUT BACK THOSE POLES.
THIS IS NOT A RATE OF RETURN
COMPANY, SO THE FACT THAT
THEY DEPRECIATE IT OVER TIME
MAY BE IMPORTANT FOR INCOME
TAX PURPOSES, BUT FOR THE
CUSTOMER, THE CUSTOMER'S
RATE DOESN'T CHANGE BASED ON
BUILD IT WAS DEPRECIATED OR
NOT SO WHY ISN'T THAT MONEY
THAT THEY HAVE PUT IN TO
REPLACE THOSE POLES JUST THE
ASSET ITSELF, NOT THE LABOR
ASSOCIATED WITH IT, WHY
ISN'T THAT DIRECTLY STORM
RELATED.
>> IT IS.
>> I MEAN, I CAN'T, I CAN'T
EXPLAIN IT ANY OTHER WAY
THAN JUST IN TERMS OF, YOU
KNOW, YOU HAVE INVESTMENTS
THAT YOU MAKE OVER TIME AND
IF YOU HAVE TO REPLACE THE
POLE TODAY TODAY, THEY
REPLACE PEDESTALS EVER DAY
ALSO.
>> BUT YOU AGREE BECAUSE
SOMETHING IS
DEAPPRECIATEATED OVER X
NUMBER OF TIME DOESN'T MEAN
THE COMPANY INTENDS TO
REPLACE THE ITEM AT THE END
OF THAT DEPRECIATION PERIOD
THE LIFE OFTEN EXTENDS WAY
BEYOND THE APPRECIATION
PERIOD OF.
>> THAT IS CORRECT.
>> ACCOUNTING MECHANISM FOR
TAX PURPOSE SO WHAT IF THE
COMPANY DEPRECIATES
TELEPHONE LINES OVER 15
YEARS BUT EXPECT THEM TO
LAST 20 YEARS SO THE LAST
FIVE YEARS THEY EXPECTED TO
MAKE -- THEY WERE NOT AGE TO
DEPRECIATE THEM, BUT GOING
TO KEEP THEM THERE, THAT
INCURREDq#Dm> THEmy EXPENSE OF
GETTING NEW ONES NOW THEY
HAVE TO INCUR THE EXPENSE
FIVE YEARS EARLIER?
WHY SHOULDN'T THEY BE ABLE
TO RECOVER THAT?
>> I, I CAN'T, I CAN'T SAY
OTHER THAN THAT IN THE WAY
THAT COMMISSION LOOKS AT IT
IS THAT THESE COSTS ARE
COSTS THAT THEY WOULD INCUR
IN THE NORMAL COURSE OF
DOING BUSINESS.
>> HOW CAN YOU SAY, IT SEEMS
TO ME, THAT YOU CAN NOT TRUL
RY SAY THAT A COST LIKE
REPLACING A NUMBER OF POLES
THAT WERE KNOCKED DOWN IN A
STORM WOULD HAVE OCCURRED IN
THE NORMAL COURSE WHEN IT
SEEMS THE POLES ARE
PERFECTLY FINE UNTIL THE
STORM COMES THROUGH, WHY
ISN'T THAT AN EXPENSE THAT A
COMPANY SHOULD RIGHTFULLY BE
ABLE TO RECOVER UNDER THIS
STATUTE THAT SAYS RESTORING,
REPLACING OR REPAIRING?
>> IT IS NO DIFFERENT THAN
SOMEBODY HIT THE POLE WITH A
TRUCK.
I MEAN, THEY GET POLES
KNOCKED DOWN ALL OF THE TIME
BY VARIOUS THINGS.
>> NO STATUTE ON THOSE?
ISN'T THAT THE ANSWER.
BUT THE MALING TUDE IS
GREATER, OBVIOUSLY.
>> AN EXAMPLE OF SOMETHING
THAT IN THE COMMISSION THE
OPINION WOULD BE RECOVERABLE
BECAUSE I CAN'T THINK OF
ANY, IF YOU CAN'T RECOVER
THIS, WHAT, WHAT IS
SO5
TO REPLACE, REPAIR OR
RESTORE THAT WOULD BE
RECOVERABLE UNDER THE
STATUTE?
>> I AM SORRY.
I AM GETTING THE QUESTION.
>> IF THE COMPANY CAN'T
RECOVER DOWNED TELEPHONE
POLES THAT THEY HAVE TO
REPLACE, WHAT CAN THEY
RECOVER UNDER THE STATUTE?
>> THEY CAN RECOVER, FOR
INSTANCE, EXTRAORDINARY COST
OF LABOR, WHICH THE
COMMISSION RECOGNIZED BY THE
WAY, WE TOOK OUT THE
IN-HOUSE LABOR BECAUSE THE
PERSON WHO IS DRIVING AROUND
IN THE TRUCK FIX PEDESTALS
TODAY, DOES THE SAME THING
TOMORROW AS A RESULT OF A
HURRICANE IS -- THE COMPANY
IS INCURING AN EXPENSE THAT
THEY COULD INCUR ANYWAY, BUT
COMMISSION RECOGNIZED THAT
THERE WERE ABOUT $50,000
WORTH OF EXTRAORDINARY
CONTRACT LABOR THAT THE
COMPANY HAD TO GO OUT AN
HIRE SOME OTHER EMPLOYEES TO
ACTUALLY FIX.
>> GIVE THE COST.
YOU SAID THAT YOU ALLOWED, I
GUESS YOU SHOWED IN OTHER
ORDER, HUNDREDS OF MILLIONS
OF DOLLARS THAT ARE BEEN
ALLOW.
GIVE ME EXAMPLE OF A CAPITAL
COST THAT HAS BEEN ALLOWED
BECAUSE IT HAS BEEN
CATEGORIZED AS EXTRAORDINARY.
>> WE HAVE, COMMISSION HAS
ALLOWED EXTRAORDINARY
RELATED TO THE LABOR AND
MATERIALS THAT WERE OBTAINED
AT A PREMIUM.
>> CAPITAL ASSET ITSELF.
THE POSITION IS THAT THE
PRICE OF THE COST OF THE
CAPITAL ASSET IS NOT
RECOVERABLE.
>> NORMAL CAPITAL
INVESTMENTS, EXTRAORD
ORDINARY CAPITAL, YES.
>> AGAIN, SORRY, YOUR HONOR.
>> CAN YOU TELL HER WHAT IS
THE DIFFERENCE UNDER THIS
SCEN NARE YES AN
EXTRAORDINARY, I THINK THAT
IS THE QUESTION?
>> WHAT IS EXTRAORDINARY
CAPITAL EXPENDITURE?
>> IT MIGHT BE THAT YOU
KNOW, THAT YOU HAD TO BUY
SOME WIRE OR A MACHINE OF
SOME SORT THAT YOU COULDN'T
GET AT THE NORMAL PRIZE, YOU
HAT TO IMPORT OF IT BECAUSE
OF THE CIRCUMSTANCES.
>> SO THE COST WAS MORE THAN
IT WOULD HAVE BEEN?
>> THAT IS CORRECT.
>> IF I MAKE A DECISION,
AGAIN, I DON'T HAVE THAT
MONEY.
I DECIDE, I DON'T VIT.
I HAVE GOT TO GO OUT, BORROW
THAT MONEY.
NOW, BECAUSE I WAS PLANNING
TO NOT REPLACE THIS FOR TEN
YEARS, SO I DIDN'T BUDGET
FOR THIS THING.
AGAIN, I GUESS I AM HAVING
TROUBLE UNDERSTANDING WHY IF
I WASN'T GOING TO REPLACE
IT, I HAVE TO FINANCE IT FOR
EXAMPLE, WOULD YOU GIVE ME
THE FINANCE CHARGES?
>> IN FACT, COMMISSION DID
RECOGNIZE THE COST
ASSOCIATED WITH SOME OF THE
INVESTMENT.
I AM SORRY, SOME OF THE
EXPENSES.
THERE IS NO REASON THAT
COMMISSION LOOKED AT THINK
IT WAY IN TERMS OF
EXPENDITURES.
FIRST OF ALL, THAT IS NOW
ACCEPTED PRACTICE FOR THE
UTILITIES, THE OTHER
COMPANIES THAT COME IN AN
REMOVE THE NORMAL EXPENSE.
MAIN, THAT HAS HAPPENED.
THAT IS OUT OF THE STATION.
>> IN OTHER WORDS --
>> IT SEEMS TO ME, COMING
BACK TO JUSTICE LEWIS'S
QUESTION TO YOUR PETITIONER
THAT IS THIS MATTER OF
SEGOLENE GADING COSTS OR IS
IT A MATTER OF COMING UP
WITH A DEFINITION OF WHAT
DAMAGE IS COVERED UNDER THIS
STATUTE?
IS THEIR A NEED FOR
STATUTORY CONSTRUCTION OR IS
IT A MATTER OF COMMISSION?
>> WELL, IT IS MATTER OF THE
COMMISSION DETERMINING WHAT
IS REASONABLE FOR THE STORM.
IF THE LEGISLATURE, IN FACT,
WAS THE COMMISSION SIMPLY TO
VERIFY THESE CALL, SAY,
OKAY, THEY SPENT THE MONEY,
THEY GET IT.
THEY COULD INCREASE THEIR
RATES UP ABOVE THE PRICE CAP
AN SIMPLY HAVE A FILE, IF
THERE IS A STORM.
>> WORKING DEFINITION OF
DAMAGE IS THE RESULT OF A
TROPICAL STORM?
WHAT IS THE WORKING
DEFINITION OF DAMAGE UNDER
THIS STATUTE FOR THE
COMMISSION IN?
>> WELL, I DON'T KNOW IF
THAT IS A TERM OF ART IN
TERMS OF COMMISSION IS
LOOKING AT.
I MEAN, DAMAGE MEANS WHAT
JFER THE STORM COSTS.
AND I GUESS THE COST, A
REASONABLE COST, I MEAN, THE
COMPANY SAID, WELL, COST IS
COST.
THAT MEANS, WE GET
EVERYTHING, DON'T MATTER IF
WE GET TWO OR THREE TIMES.
>> BUT THAT IS WHAT I SAID,
I THINK THEY WENT OVERBOARD
ONE WAY, BUT IT SEEMS,
THATGAIN, I CAN'T GET AWAY
FROM THIS, HOW CAN SOMETHING
BE NORMAL OPERATING COST IF
-- IF I DIDN'T PLAN IN THIS
YEAR TO SPEND $2200,000 TO
REPLACE THOSE THINGS?
MY $200,000 WAS GOING TO BE
SPENT ON UPGRADING FACILITY,
ANOTHER FACILITY, NOW, YOU
CAN'T DO THAT, I MEAN, IF
THEY COULD ESTABLISH, I
CAN'T DO THAT BECAUSE I HAD
TO SPEND THAT $200,000 ON
THIS.
WHY?
IF WITH PROPER PROOF, ISN'T
THAT AN APPROPRIATE SUBJECT
FOR THE, YOU KNOW, ALLOWING
THAT, THEN ALLOWING THE
SURCHARGE TO OCCUR?
>> BECAUSE IT IS NATURE OF
THE EXPENSE.
IT IS -- EYE UNDERSTAND THAT
THINGS HAPPEN.
HAVE TO PUT OUT MY -- MONEY
AT ANY GIVEN TIME THAT YOU
MIGHT NOT HAVE OTHERWISE.
THE COST ASSOCIATED WITH
THAT, $LY, BUT THE QUESTION
IS:
ARE YOU GOING TO GET IT
BACK?
THAT IS A NORMAL INVEST.
>> IF IT IS ISN'T, THE
COMMISSION BY DISALLOWING
THESE COSTS CAN IN ESSENCE
TAKE REGULATORY PRINCIPAL
AND RATE MAKE PRINCIPAL AND
NOW IN KORM OPERATING THEM
IN AN AREA THAT THEY WERE
NOT DESIGNED FOR.
ISN'T THAT REALLY WHAT THE
COMMISSION ENDS UP DOING
THEN IN TAKING THIS
REASONABLE AND FILLING IT
FULL OF THESE REGULATORY
PRINCIPALS IN AN INSTANCE
WHERE WE DON'T HAVE A
REGULATED COMPANY?
AND THAT IS WHERE I AM
HAVING DIFFICULTY BECAUSE IT
SEEMS LIKE EVERYTHING THAT
THE COMMISSION IS TALKING
ABOUT AND DENYING THESE
CHARGES IS BASED ON THE LONG
HAUL AND WOULD THEY HAVE
BEEN REPLACED ANYWAY?
ALL OF THE THINGS THAT
ORDINARILY WOULD MAKE
PERFECTLY GOOD SENSE IN
TERMS OF REGING LA TORY
PRINCIPAL, BUT IN TERMS OF
WHAT THE APPARENT INTENT OF
THE LEGISLATURE WAS WITH
THIS STATUTE IT WAS TO SAY
GET OUT THERE AND DO THIS
NOW, SO YOUR CUSTOMERS WILL
BENEFIT FROM THIS BY YOU
ACTING RIGHT AWAY AND AS
LONG AS WHAT YOU DID WAS
REASONABLE UNDER THE
CIRCUMSTANCES OF THIS
TERRIBLE STORM, THEN YOU ARE
GOING TO BE ALLOWED TO
RECOVER IT.
>> HELP ME WITH THE WAY THE
COMMISSION HAS DONE THIS
BECAUSE IT JUST LOOKS LIKE
THE WAY THAT YOU ARE
JUSTIFYING THESE DENIALS
LIKE OLD FASHION REGULATORY
PRINCIPAL.
>> WELL, FIRST OF ALL, I
MEAN, THIS IS NOT AN ANSWER
TO THE QUESTION, BUT THE WAY
THE COMMISSION LOOKED AT IT,
EVERY BUSINESS DOES YOUR
ACCOUNTING THE SAME WAY,
THERE IS NO QUESTION THAT
THIS COMPANY DOES ITS
ACCOUNTING FOR THE ASSETS BY
DEPRECIATING THEM OVER A
PERIOD OF TIME, 15 YEAR,
THEY HAVE TO DO THAT, IN
PART, BECAUSE THE
APPLICATION THETION FEDERAL
HIGH COST FUND, BUT I THINK,
THE OTHER ANSWER IS --
>> I MEAN, HAD ANY BUS NES
OF THE COMMISSION IN THIS
INSTANCE?
>> YOU HAVE TO LOOK, I THINK
AT THE INTENT OF THE PRICE
GAP STATUTE GENERALLY.
IS IT NOT TOTALLY, THE
COMPANY IS NOT TOTALLY
UNREGULATED.
THE LEGISLATURE PASSED THE
STATUTE, IT SAID, OKAY, WE
ARE GOING TO LET YOU GO OUT
DLN A COMPETE WITHIN A PRICE
GAP, IT IS GOING TO BE
INFLATION MINUS 1%, YOU CAN
RAISE YOUR RATES AND
REVENUE.
THE STATUTE IS, WHEN IT WAS
ENACTED IS THAT THE COMPANY
WILL BE ABLE TO COVER ITS
NORMAL COST IN THAT SCENARIO
AND IF IT HAS AN
EXTRAORDINARY, HAS AN
EXTRAORDINARY CIRCUMSTANCES
WHICH CAUSE IT TO FAIL UNDER
THAT PRICE CAP REGIME, KIT
COME TO THE COMMISSION AND
ASK FOR RATE HIKES, SO THE
TACKED ON PART OF THE
STATUTE SIMPLY SAYS THERE
WILL BE PRESUMPTION, A
COMPELLING CHANGE OF
CIRCUMSTANCE AND THE
COMMISSION CAN GRANT YOU
RELIEF, OTHERWISE WOULD NOT
BE ABLE TO GET IT BECAUSE
THE PRESUMPTION IS THERE IS
A STATUTE THAT YOU ARE
MAKING ENOUGH MONEY TO RUN A
BUSINESS AND TO RUN A
PROFIT.
>> LET ME ASK YOU THIS ON
THE LABOR COST BECAUSE THAT
IS SOMETHING THAT WAS EASIER
JUST TO GET YOUR ARMS
AROUND.
YOU SAID THAT THEY WERE
ENTITLED TO GET ANY OF THEIR
CONTRACT LABOR, BUT CLEARLY,
THE PEOPLE, YOU SAID, WELL,
THEY WOULD BE DRIVING TRUCKS
AROUND, REPLACING PED STOOLS
EVERY DAY, WELL, WE SEE
PICTURES OF THE DEVASTATION
THAT OCCURRED, DON'T --
AREN'T WE ENTITLED OR AREN'T
THEY EN TITLED TO BE ABLE TO
SAY, THOSE PEOPLE WERE NOT
GOING TO BE THAT WORK ON
THOSE, THAT STORM-RELATED
DAMAGE, THEY WERE GOING TO
BE DOING OTHER THINGS.
YOU ARE CERTAINLY NOT GOING
TO MAKE US GO OUT AND
CONTRACT BECAUSE THEY COULD
HAVE DONE THAT, RIGHT?
THEY COULD HAVE CONTRACTED
FOR ALL OF THAT LABOR
BECAUSE THEY NEED THEIR
PEOPLE WHEREVER THEIR PEOPLE
NORMALLY AN RECOVER MOST OF
THAT, SO WHY SHOULDN'T YOU
BE ABLE TO RECOVER THE
REASONABLE COST OF THE LABOR
THAT WAS ASSOCIATED WITH IT
WITH SOMETHING THAT IS FOR
SURE AN EXTRAORDINARY
SITUATION WHICH IS HAVING TO
REPAIR DEVASTATION,
DEVASTATING DAMAGE FROM
HURRICANE?
>> WELL, THE COMMISSION ON
ANY ACTIVITY THAT IT
UNDERTAKES HAS TO LOOK AT
THE ENTRANCE OF THE COMPANY
AND THE INTEREST OF THE RATE
PAYER, AND IN THE CASE, IT
COMES BACK TO THE QUESTION,
ARE YOU GOING TO LET THE
RATE PAYERS PAY FOR IT TWICE
OR ARE YOU GOING TO TRY
PARCEL OUT THOSE THINGS THAT
YOU RECOGNIZE AS BEING
EXTRAORDINARY EXPENSES THAT
WOULDN'T HAVE BEEN IN KURD
FOR THE HURRICANE ADDITION
TO WHAT YOU NORMALLY PAYING
YOUR, WHATEVER YOUR NORMAL
COST, THAT MAKES SENSE
BECAUSE THE RATE PAYERS ARE
THEN PICKING UP THE TABS OF
THE REAL EXTRA DAMAGE.
THEY ARE NOT PAY FOING FOR
IT TWICE.
>> IN THE CASE, THEY HIRED
THE OUTSIDE CONTRACTORS TO
DO IT AS JUSTICE PARIENTE
JUST SAID, AGREED THAT COULD
HAVE BEEN PAST ON, RIGHT?
>> IF -- IF THEY HAD INSTEAD
OF HAVING THEIR IN-HOUSE
EMPLOYEES DO THIS REPAIR
WORK DUE THE STORM, DHOOE
HAVE CONTRACKED IT OUT, IF
THEY HAD CONTRACTED IT OUT,
WOULD IT BE YOUR POSITION,
THAT WOULD HAVE BEEN
CHARGEABLE TO THE --
>> IF THAT WERE NECESSARY TO
ADDRESS THE SITUATION, OF
COURSE, THEY BUDGET A
CERTAIN AMOUNT OF CONTRACT
LABOR ANYWAY, BUT LIKE SAID,
THE COMMISSION DID RECOGNIZE
THERE WERE ABOUT $50,000 IN
EXPENSES THAT WERE FOR
CONTRACT LABOR WHICH
OTHERWISE WOULD BE IR
RECOGNIZABLE ON THE EXPENSE.
BUT THE COMMISSION HAS TO
LOOK AT THE OPERATIONS OF
THE COMPANY AND, YOU KNOW,
KNOW WHAT THEIR PERIMETERS
ARE FOR GIVING IT.
DIE WANT TO ASK YOU ABOUT
THE STATUTE SEEMS TO SAY
THAT THERE IS ONLY ONE ITEM
THAT YOU REALLY TAKE INTO
CONSIDERATION AND
DETERMINING TO SUBTRACT
SOMETHING HERE AND THAT IS
THE AMOUNT THAT YOU MIGHT
HAVE RABL IN A RESERVE SO
WHERE DO YOU, WHERE DOES THE
COMMISSION GET THE AUTHORITY
TO TAKE INTO CONSIDERATION
THIS OTHER FUND THAT AS YOUR
OPPONENTS SEEMED TO SUGGEST
IS EVEN SPECULATIVE AT THIS
POINT AND THEY WOULD NOT
HAVE GOTTEN IT ANY TIME TO
ACTUALLY HELP WITH THE STORM
PAYMENT.
>> WELL, FIRST OF ALL, I
THINK THE COMPANIES
MISCONSTRUING THE MEANING OF
THAT STATUTE, THAT SECTION,
ITH DOES NOT RELIEVE THE
COMMISSION OF THE DUTY TO
DETERMINE WHAT OUR
REASONABLE EXPENSE IS.
REASONABLE UNDER THE
CIRCUMSTANCES STILL HAVE TO
APPLY WHEN YOU DETERMINE
WHAT GOES INTO THERE, WHAT
IS CHARGED AGAINST THE STORM
RESERVE.
SO IT DOESN'T CONTRADICT
WITH THE IDEA, IT DOESN'T
THE NEED TO MAKE
DETERMINATION OF WHAT IS A
REASONABLE EXPENSE, SO THE
EXCEPTION DOESN'T NOT DO
AWAY THE COMMISSION'S
PROBLEM OF DEALING WITH WHAT
REASONABLE EXPENSE UNDER THE
CIRCUMSTANCES.
I THINK SHE WAS ASKING IS
THAT ANSWER YOUR QUESTION?
>> WELL, IT JUST SIMS TO ME,
THE STATUTE HAS THIS ONE
EXCLUSION SO WITHOUT ANY
SAYING AND YOU CAN TAKE INTO
CONSIDERATION OTHER THINGS
THAT MAY BE REIMBURSED AND
THE LEGISLATURE COULD HAVE
EASILY SAID THAT, THAT I AM
NOT SURE THAT I SEE WHERE
THE COMMISSION HAS RIGHT TO
TAKE INTO CONSIDERATION SOME
FUND THAT MAY OR MAY NOT BE
PAID DOWN THE LINE.
>> IT HAS ALREADY COME UP IN
DISCUSSION, THAT I WOULD BE,
FOR INSTANCE, THE COMMISSION
COULD NOT TAKE INTO ACCOUNT,
RECOVERED BY INSURANCE.
IT JUST DOESN'T MAKE ANY
SENSE.
COMMISSION, OF COURSE,
LOOKED AT THE HIGH COST THAT
THESE COMPANIES DISCOVERED.
>> THANK YOU VERY MUCH.
WITH OUR ASSISTANCE, YOU NOT
ONLY EXHAUSTED YOUR TIME,
YOU HAVE GONE BEYOND.
>> MR. HOFFMAN, WE'LL GIVE
YOU A COUPLE MINUTES.
>> THANK YOU, YOUR HONOR.
I WILL TRY MAKE FEW POINTS
TO CONCLUDE MY REMARKS.
FIRST OF ALL, THE ARGUMENT
REGARDING THE DISCUSSION
REGARDING DOUBLE RECOVERY.
DOUBLE RECOVERY REQUIRES AN
EARNINGS TEST.
YOU DON'T KNOW IF THE
COMPANY HAS DOUBLE RECOVERED
UNLESS YOU LOOK AT THEIR
EARNINGS.
EARNINGS TEST -- FULLY
REGULATED COMPANIES AT THE
PSE LIKE ELECTRIC UTILITIES
AN LIKE WATER UTILITIES.
>> LET ME ASK YOU THIS.
SAID EARLIER WERE YOU NOT
NOW APPEALING THE FIBER
VERSUS THE COPPER, AND THAT
WAS INVOLVED IN THE POINT
SITUATION SO YOU ARE YOU NOT
APPEALING AT ALL ANYTHING
ABOUT ALLIGATOR POINT ARE
YOU STILL, YOU HAVE THE
LABOR IN THE CAPITAL.
>> THE LABOR.
>> WHAT DO YOU CONSIDER TO
BE THE CAPITAL BECAUSE I
THOUGHT THE CAPITAL WAS A
PART OF THIS WHOLE COPPER
VERSUS FIBER.
>> JUSTICE, I THINK WERE
OTHER SORT OF CAPITAL
REPLACEMENT ITEMS THAT WERE
INSTALLED THROUGHOUT THE
SERVICE AREAS INCLUDING
ALLIGATOR POINT, YOU KNOW,
WHETHER YOU ARE TALKING
ABOUT PED DY STOOLS AN SO
FORTH, THE ITEM THAT WE DID
NOT APPEAL, THE MORE
CONTRAVERSION ISSUE US THE
REPLACEMENT OF COPPER WITH
FIBER.
SO ON THE DOUBLE RECOVERY
ISSUE AGAIN, THAT REQUIRES
AN EARNINGS TEST, THERE IS
NOTHING MENTIONED OF AN
EARNINGS TEST IN THIS
STATUTE AND BY WAY OF
COMPARISON, THERE IS THE
ELECTRIC STATUTE PASSING THE
SAME LEGISLATIVE SESSION,
THE EARNINGS TEST, PER SAY,
DOES NOT APPLY TO
COMPETITIVE INCUMBENT LOCAL
PHONE COMPANY.
>> WELL, YOUR BOTTOM LINE IS,
HOW MUCH OF THIS AMOUNT THAT
YOU CLAIMED DO YOU NOW CLAIM
THE COMMISSION SHOULD HAVE
ALLOWED?
>> $225,000.
WE SAW IT.
WE SAW PETITION FOR $312,000
OF COST, THE COMMISSION
AWARD US AROUND $1,000 OUT
OF THAT $312 PLUS A FEW
THOUSAND IN CARING COST.
>> SO IF YOU TOOK OUT -- IF
YOU TAKE OUT THE SUBSIDY
THAT $140, WOULD THAT BRING
YOU DOWN TO $80,000?
>> WELL, THE -- DARNL SORRY,
JUSTICE, THE WAY THAT I SORT
OF PUT IT TOGETHER, WE ASKED
FOR $312.
THEY GAVE US $311.
WE ARE NOT APPEALING THE
DENIAL OF THE EVERHEAD AND
BENEFITS THAT IS ASSOCIATED
WITH THE IN-HOUSE LABOR.
THAT IS ABOUT $59.
WE'RE NOT APPEALING THE
REPLACEMENT, THE INCREMENTAL
COST ASSOCIATED WITH USING
FIBER INSTEAD OF COPPER.
THAT IS ABOUT $28, SO WHEN
DO YOU THE MATH, WHAT YOU
ARE LEFT WITH IS
APPROXIMATELY $225 HOWE.
>> IF WE AGREE WITH YOU ON
EVERYTHING EXCEPT THE SUBDAY
THIS WOULD ABOUT 80,000?
>> SUB DY BEING THE HIGH
COST?
YES.
>> THAT BASS $40,000.
>> $40,000?
>> OKAY.
>> WITH OUR HELP, YOU HAVE
EXHAUSTED THE ARE RIDGE NAL
TIME AND EXTRA MINUTES AS
WELL.
WE THANK YOU FOR YOUR
ARGUMENTS THESE CASES ARE
ALWAYS VERY INTERESTING,
ENLIGHTENINGEN, THE COURT
WILL TAKE IT UNDER
ADVISEMENT.
WE'LL TAKE MORNING RECESS.