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On June 27, 2019, the California Public Utilities Commission held its regularly scheduled agenda meeting in San Francisco. The principal items of interest were the approval of a new revenue requirement and rate design for Ducor Telephone Company and the adoption of a categorical CEQA exemption for Ponderosa Telephone Co.’s Beasore/Central Camp CASF project. The Commission also voted to unanimously oppose Assembly Bill 1366, concerning state regulation of VoIP and VoIP-enabled services.

REGULAR AND CONSENT AGENDA ITEMS

Ducor Rate Case Resolved. [Item 7, Adopted on Consent Agenda]

The Commission adopted a new revenue requirement and rate design for Ducor Telephone Company (“Ducor”) following a protracted litigation of numerous issues through the formal process. The decision adopted by the Commission sets the overall intrastate revenue requirement at $2,394,658 for test year 2019, to be recovered through adjusted rates and $1,536,526 from the CHCF-A. Whether the result is measured by revenue requirement or by CHCF-A, it is closer to Ducor’s proposal than the Public Advocates Office’s position, so the overall result favors the company. In the specifics, it is a mixed bag of outcomes. Ducor was given categorical approval to pursue its investments, and it avoided the Public Advocates Office’s arbitrary reductions to depreciation expense. The Commission also rejected almost all of the Public Advocates Office’s reporting requirements and Ducor-specific rules, including proposals that Ducor evaluate low income broadband, negotiate a deal with a wireless carrier, and provide broadband service quality reports. On the other hand, the Commission rejected recovery of rate case expense, applied the corporate cap in full, adopted the normalization methodology for “excess” deferred tax liabilities, and adopted a per-subscriber allocation theory for allocating Ducor’s expenses.

D. 19-06-005, the decision adopted by the Commission including its appendices is available at: http://docs.cpuc.ca.gov/SearchRes.aspx?DocFormat=ALL&DocID=301140331

Beasore/Central Camp Unserved and Underserved CASF Broadband Project Categorically
Exempt under CEQA. [Item 3, Adopted on Consent Agenda]

The Commission approved a draft resolution granting a categorical CEQA exemption for the Beasore/Central Camp Unserved and Underserved Broadband Project (“Beasore/Central Camp Project” or “Project”), and releasing $1,755,042 in California Advanced Services Fund (“CASF”) grant funding to the Ponderosa Telephone Co. (“Ponderosa”) to construct the Project as provided for in Resolution T-17424 (December 19, 2013). In Resolution T-17424, the Commission conditionally authorized a CASF grant of $1,755,042 to deploy fiber-to-the-home connections capable of 50/20 Mbps speeds in the Beasore and Central Camp areas of Madera County. This investment would provide Internet and telephone services to an area that is currently completely unserved by landlines and has a mix of underserved and unserved coverage from wireless providers. Ponderosa would provide backhaul for this project via ADSL-enabled fiber attached to Pacific Gas & Electric Company poles to the Central Camp area. The Beasore area would receive its backhaul from a microwave radio installation with solar power and a back-up
generator powering the radio, fiber transmission, and network terminating equipment at the
subscriber premises. The resolution adopted by the Commission finds that Ponderosa’s Proponent Environmental Assessment (“PEA”) to the Energy Division’s Infrastructure Permitting and CEQA Section and the USDA Forest Service’s Decision Memos for Special Use Permits under the National Environmental Policy Act support the Project’s categorical exemption on this basis that the Project’s activities would not have a significant effect on the environment (CEQA Guidelines Section 15061).

The adopted version of the resolution (Res. T-17653, July 2, 2019) is available here:
http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M309/K117/309117108.PDF

Legislative Item: AB 1366 (Gonzalez, State Regulation of VoIP and VoIP-enabled Services).
[Item 29, Adopted on 5-0 Vote]

The Commission voted to approve a memorandum from the Commission’s Office of Governmental Affairs (“OGA”) to oppose AB 1366, which extends for an additional ten years the qualified prohibition against any state or local entity’s regulation of VoIP and VoIP-enabled service, including the prohibition against the Commission from regulating VoIP and VoIP enabled service unless expressly directed by the Legislature in the interest of public safety or consumer protection. After approving this item, the Commission instructed its staff to share its position with the Legislature and the Governor’s Office. AB 1366 is significant because it would preserve the jurisdictional protections that VoIP and VoIP-enabled services presently enjoy under Public Utilities Code Section 710. The OGA memorandum proposes the Commission oppose AB 1366 because:

  1. The legislation does not affect VoIP applications like Skype and WhatsApp because the Commission does not have authority over the content of communications.
  2. The VoIP industry has grown to a size and stage that warrants “meaningful oversight.”
  3. The legislation would end meaningful oversight of telecommunications and jeopardize public safety, service quality, and universal service.
  4. The legislation would further delay the resolution of Commission proceedings, hamper consumer protection and enforcement, limit the investigation of competition in the telecommunications, and contradict the Commission’s licensing authority and the goals of the California LifeLine program. Notably, the memo also suggested that Public Utilities Code Section 710 discourages CHCF-A companies from offering modern VoIP services.
  5. The legislation would uphold the inapplicability of the California Invasion of Privacy Act to VoIP calls, and expose the Commission’s tariffing requirements for Next Generation 9-1-1 services to jurisdictional legal challenges.

During the voting meeting, OGA Director, Hazel Miranda summarized the above points and highlighted the need for greater CPUC oversight power in light of wildfire safety and an alleged lack of telecommunications competition for millions of California customers. Director Miranda framed AB 1366 as a barrier to sustaining and modernizing requirements and standards to ensure reliable, resilient and universal telecommunications service in a period when VoIP is eclipsing traditional phone service. She further claimed that AB 1366 would allow companies that own and manage communications facilities, like Comcast and AT&T, to fall behind in critical infrastructure investment and selectively serve certain communities.

Commissioner Guzman Aceves stated that the plethora of pending appeals, based on Public Utilities Code Section 710, by telecommunications parties in CPUC proceedings is illustrative of the problem that would be perpetuated by AB 1366. Commissioner Guzman Aceves also voiced discontent with the inapplicability of the California Invasion of Privacy Act as a result of Public Utilities Code Section 710 and concern regarding the ability of the Commission to regulate rates for inmate calling. Commissioner Guzman Aceves also noted two changes in the communications environment that informs her support of the OGA memo: first, VoIP is no longer a nascent technology in the communications industry; second, the current FCC is less rigorous than that of the former administration in protecting consumers.

Commissioner Randolph also provided a statement of support of the memorandum recommendation, highlighting that allowing Section 710 to sunset would be consistent with Californians’ current means of receiving their telephone service, and would ensure safety and reliability for Californians.

Commissioner Shiroma also supported OGA’s recommendation to oppose AB 1366. She stressed the need to assure the state’s access to safe and reliable utility infrastructure and services, especially in the aftermath of wildfires, and especially for vulnerable communities.

Commissioner Rechtschaffen stated that the purpose of the predecessor bill to AB 1366, which led to Section 710, has been fulfilled, given that VoIP has come from being a nascent technology to a dominant technology in the communications space. He reasoned that given this, extending the qualified prohibition against state regulation of VoIP and VoIP-enabled services would
presently be a barrier to consumer protections and emergency and disaster-related response. Commissioner Rechtschaffen also agreed that this bill may inhibit the Commission from properly overseeing service quality, universal service, and Next Generation 9-1-1.

The latest version of AB 1366 is available here:
https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB1366

Vero Fiber Networks LLC CPCN Application Approved. [Item 6, Adopted on Consent
Agenda]

The Commission granted Vero Fiber Networks, LLC (“Vero Fiber”), a Colorado company authorized to do business in California, a CPCN to provide resold full facilities-based local exchange and interexchange telecommunications services the incumbent local exchange service territories of AT&T California, Frontier California, Verizon, and Consolidated Communications. Vero Fiber intends to deploy a fiber-optic network to deliver Internet-protocol voice and data
communication services and deliver services to schools and educational institutions that participate in the Federal E-rate program. Vero Fiber will not provide residential services. Vero Fiber’s services will be delivered over dedicated lit fiber of private and shared facilities, interconnected with the public internet and the public switched telephone network. Vero Fiber
also plans to provide fiber-based broadband voice and data services by installing its facilities in existing rights-of-way and by selling or leasing dark fiber to other providers and end-users. Vero Fiber may undertake construction activities to install underground and above-ground facilities in existing rights of way and utility easements. These activities include trenching, micro-trenching, directional boring to install underground fiber optic cables, installation of underground access points (e.g., hand holds and vaults) and fiber in existing conduit and on existing or new utility poles. The proposed decision finds that Vero Fiber’s proposed facilities-based project activities are very limited, and likely to qualify for an exemption from CEQA. The proposed decision approves Vero Fiber’s proposed process for Commission’s expedited review of claimed CEQA
exemptions.

The adopted version of the decision underlying this item is available here:
http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M309/K179/309179143.PDF

Conference with Legal Counsel Regarding the Velocity Communications, Inc.’s Application
for Rehearing of D.18-06-036. [Item 35, Discussed in Closed Session]

The Commissioners met in closed session with CPUC Legal Division staff to discuss Velocity Communications, Inc. (“Velocity”)’s application for rehearing of Decision (“D.”) 18-06-036. In D.18-06-036, the Commission denied Velocity’s application for rehearing of Resolution T17548, which granted Inyo Networks, Inc. (“Inyo”) $46,709,036 in CASF funding to construct middle mile and last mile facilities between Redding and the California coast. Velocity’s application for rehearing of T-17548 was based on Velocity’s claim that T-17548 had failed to consider the entire record, which would have shown that Lewiston, a community within the expanse of Inyo’s CASF project, was already served by Velocity. The Commission denied
Velocity’s application for rehearing on the grounds that Velocity failed to demonstrate legal error. In Velocity’s Application for Rehearing of D.18-06-036, Velocity alleges multiple legal errors in D.18-06-036. After the Commission meeting, the Commission released Decision 19-06-039 (June 27, 2019) that modified D.18-06-036 to clarify its decision and denied rehearing finding no legal error in its prior decision in this matter.

Decision 19-06-029 (June 27, 2019) is available here:
http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M308/K859/308859410.PDF

SIGNIFICANT HELD AND WITHDRAWN ITEMS

Decision on Appeal of Presiding Officer’s Decision Determining Pole Attachment Fee. [Item 11, Held to 7/11/19 by Commissioner Rechtschaffen]

The Commission held a decision on the California Cable & Telecommunications Association (“CCTA”)’s appeal of the Presiding Officer’s Decision (“POD”) determining San Diego Gas & Electric Company’s (“SDG&E”) annual recurring pole attachment fees for billing years 2017 and 2018. Notably the Commission met in closed session to discuss this item. The POD issued on
April 11, 2019 addressed CCTA’s November 6, 2017 complaint that SDG&E violated Public Utilities Code Section 767.5 for charging pole attachment fees that diverge from the formula set forth in the statute. In the POD, the assigned administrative law judge determined that SDG&E’s pole attachment fees should have been $28.95 for billing year 2017 and $28.82 for billing year 2018. On May 10, 2019, Commissioner Rechtschaffen requested review of the POD on the grounds that the Commission should consider allowing CCTA to conduct discovery of documentation underlying SDG&E’s accounting of the cost of ownership of its utility poles, particularly with regard to appurtenances. Commissioner Rechtschaffen proposed in his Request
for Review that the 15% appurtenance adjustment factor set forth in the POD is a rebuttable presumption and CCTA should be allowed reasonable discovery to challenge it. On May 13, 2019, CCTA appealed the POD on the grounds that the POD contained legal errors and incorrect factual assertions. Specifically, CCTA alleged that the ALJ abused her discretion with respect to
the Commission’s discovery rules, SDG&E failed to provide actual cost data in its possession related to appurtenances, the ALJ violated CCTA’s due process rights by establishing a new discovery standard at the Evidentiary Hearing after the discovery period had closed, and the POD erred in adopting separate rates for wood and steel poles as wood and steel poles are not
“similar support structures.”

The POD underlying this item is available at
http://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M281/K395/281395260.PDF

CCTA’s Appeal of the POD is available at http://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M289/K993/289993761.PDF

Commissioner Rechtschaffen’s Request for Review is available here:
http://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M290/K324/290324395.PDF

Legislative Items: Assembly Bills and Senate Bills. [Items 27-31, Held until 7/11 by Staff]

Without discussion, the Commission continued its prior hold of all legislative items, except AB
1366, discussed above.

COMMISSIONER REPORTS

Commissioner Shiroma announced that Leuwam Tesfai has been appointed as her chief of staff. For the previous few months, Tesfai was Commissioner Shiroma’s interim chief of staff. Tesfai was previously a staff attorney in the Commission’s Legal Division, focusing on Federal Energy Regulatory Commission work. Prior to this, Tesfai was an advisor to Commissioner Randolph. Tesfai also practiced environmental and energy law at an international law firm. Commissioner Shiroma also announced Terrence Shia has been appointed as her water, telecom and transportation advisor. Shia was previously a supervisor in the Water Division of the CPUC on a variety of issues, including ratemaking and implementing long-term improvements in water conservation and drought planning. Before becoming a supervisor, he was a Senior Engineer in the water and communications branch of the Public Advocates Office.

MANAGEMENT REPORTS

Executive Director Alice Stebbins reported that she attended a meeting of the Topanga Emergency Task Force, a group of volunteer organizations and first responders who meet quarterly to address challenges the local community would face during emergencies. The primary focus of the meeting was to address proactive de-energization for the mitigation of wildfire risk during extreme weather conditions. In addition to the members of the task force, Cal OES, Cal Fire, Los Angeles Sheriff’s Office, Assembly member Richard Bloom’s Office, Congressman Ted Lieu’s Office, the Mountain Recreation and Conservation Authority, the Topanga Chamber of Commerce, the Los Angeles Water District, Southern California Edison, AT&T, Spectrum, and Verizon were present at this meeting. The utility representatives were asked to explain their organizations’ disaster plans. The companies present discussed back-up power capacity, community outreach efforts, ingress and egress, and other related issues. Most of the conversation, however, pertained to communications issues. Director Stebbins explained during this meeting the state’s increasing reliance on cell phones and internet-based voice service, and the CPUC’s limited authority over wireless service and lack of authority over VoIP service. Director Stebbins stated that the CPUC would continue to work with Topanga and other communities.

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