BEFORE THE PUBLIC UTILITIES COMMISSION

1. SBC’s application is in violation of D.01-12-009, which requires the surcharge question to be addressed in a second phase of the Undergrounding rulemaking.
2. Resolution E-3788 does not authorize the relief sought by SBC.
3. The mechanism will result in significant stranded costs.
4. The reasonableness and prudence of SBC’s undergrounding costs are not assured.
5. SBC’s proposal is in violation of the NERF mechanism.    

I.                   I.                   VIOLATION OF D. 01-12-009 

SBC’s application is premature and in violation of current Commission rules. In its Decision 01-12-009, the Commission addressed undergrounding costs and ordered that:

In Phase 2, we will address issues that we were unable to fully cover in Phase 1 without hearings.  Some issues we will explore in Phase 2 are: 1) whether or not to establish standards for conversion projects so third parties can competitively bid on projects with no compromise of quality, safety, or reliability; 2) whether incentive mechanisms are an effective cost management tool; 3) whether there should be a “breakpoint” in allowing new overhead pole and line installations; or whether the current exemption process is working; 4) whether there are benefits to listing the charges for undergrounding as a line item on utility bills; 5) whether there is a fair and equitable, competitively neutral recovery mechanism for telecommunications carriers and cable companies to recover their undergrounding costs; 6) whether adjustments in the Rule 20A allocation formula is appropriate; 7) whether there are reforms to the statewide conversion program that are more properly within the legislative domain.  (Id, p.2 , emphasis added)             As SBC acknowledges in its application, the second phase of this proceeding was a necessary precondition to SBC or any other phone company seeking the surcharge relief for undergrounding costs.   SBC’s request is premature in that the second phase has not been undertaken and the Commission has not had the benefit of input by the many stakeholders (customers, competitors, energy utilities and municipalities) that would be adversely affected by a dramatic change in Commission policy.

II.                 II.                 RESOLUTION E-3788 DOES NOT DIRECT SBC TO SEEK A SURCHARGE

Contrary to SBC’s representation,  Resolution E-3788 does not permit SBC to seek the surcharge.  SBC’s states “Consistent with the Commission’s direction in Resolution E-3788, SBC files this application…”  (Application, p. 3)    In fact, the Resolution makes no such recommendation.   As SBC admits, it only acknowledges that the City resolved the undergrounding costs with other carriers but did not with SBC.   The fact that other carriers were able to reach an accommodation with the City suggests that the costs involved were nominal.   In stark contrast, the $125 million in future undergrounding costs estimated by SBC are shockingly high.  

III.              III.              THE RELIEF SOUGHT BY SBC MAY RESULT IN STRANDED COSTS

One of the key factual questions raised by the SBC application is whether the undergrounding of the phone lines is warranted.    The most likely scenario is that undergrounding of the phone lines are unnecessary.   The development of WiMax and other wireless technologies present a lower-cost solution to the relocation of the electric poles.  SBC might be able to avoid all undergrounding costs by simply installing a wireless alternative in the proximity of the undergrounded powerlines.    The benefits from this alternative installation might well outweigh any costs incurred.    The SBC application contains no least-cost requirement and does not address some of the financial benefits that might inure to the utility if it were to use a wireless alternative. 

IV.             IV.             THE BALANCING ACCOUNT CONTAINS NO COST OVERSIGHT

SBC’s application contains no mechanism by which the public can be assured that the undergrounding costs – to the extent that they are warranted – are reasonable.    The Commission is required to ensure that any costs incurred by SBC for undergrounding were prudently incurred and reasonably priced.    There is no discussion as to how the Commission will be able to ensure the reasonableness of any balancing account costs. 

V.               V.               THE PROPOSAL MAY VIOLATE THE NRF MECHANISM

SBC currently operates under a rate-capped mechanism under which SBC is prohibited from increasing basic service costs every time the company faces increased costs.   The mechanism offers certain exceptions.  A number of factual and legal questions are raised by the SBC application that require, at a minimum, factual analysis.  SBC does not cite to any specific Commission order that explicitly exempts undergrounding costs from the NRF mechanism.                For these reasons,  UCAN urges that the Commission require evidentiary hearings prior to ruling on this application.

3100 Fifth Ave.

Suite B

San Diego, CA  92103

619-696-6966