WEBVTT 00:00:03.789 --> 00:00:06.379 The feed for this streaming event brought to you by 00:00:06.389 --> 00:00:09.800 adminmonitor.com will begin momentarily. Thank 00:00:09.810 --> 00:00:12.300 you for your patience. 00:00:12.300 --> 00:00:17.559 Hello, everyone and I apologize for the delay. Uh, my 00:00:17.568 --> 00:00:21.329 name is Patricia Miles. I am the assigned Administrative 00:00:21.339 --> 00:00:25.239 Law Judge for this proceeding. We will now be on the 00:00:25.250 --> 00:00:29.579 record and the Commission will come to order. 00:00:29.579 --> 00:00:34.250 It is Wednesday, June 21, 2023, and this is a remote 00:00:34.259 --> 00:00:37.868 Public Participation Hearing for the application filed 00:00:37.880 --> 00:00:46.389 in Proceeding A.22-09-003 by small telephone providers. 00:00:46.459 --> 00:00:49.259 For determination of the cost of capital that will 00:00:49.270 --> 00:00:52.630 be implemented in their company's specific ratemaking 00:00:52.639 --> 00:00:56.279 determinations. The companies which have filed this 00:00:56.289 --> 00:01:01.228 application are: Calaveras, Cal-Ore, 00:01:01.228 --> 00:01:09.150 Ducor, Foresthill, Kerman, Pinnacles, Ponderosa, Sierra 00:01:10.430 --> 00:01:14.400 Siskiyou and Volcano Telephone Companies. 00:01:14.400 --> 00:01:16.719 The assigned Commissioner for these proceedings is 00:01:16.730 --> 00:01:20.189 Commissioner John Reynolds. You will hear from Commissioner 00:01:20.198 --> 00:01:40.290 Reynolds later during this PPH. 00:01:40.290 --> 00:01:43.500 First, I want to start by acknowledging that although 00:01:43.510 --> 00:01:46.180 our state and local communities are beginning to recover 00:01:46.189 --> 00:01:50.418 from the effects of COVID. Which has affected our daily 00:01:50.430 --> 00:01:53.269 lives for more than 3 years now. The Commission 00:01:53.278 --> 00:01:56.439 is holding this Public Participation Hearing online 00:01:56.959 --> 00:02:00.430 and by phone. Because we have found that remote hearings 00:02:00.439 --> 00:02:04.719 provide convenient access to the public. Travel time 00:02:04.730 --> 00:02:07.579 to a public venue need not occur with these types of 00:02:07.588 --> 00:02:12.038 Hearings. So in this proceeding, where several companies 00:02:12.050 --> 00:02:15.490 located in many different areas of the state are participating. 00:02:16.008 --> 00:02:19.179 This remote Hearing provides an excellent option to 00:02:19.189 --> 00:02:22.419 encourage public engagement, despite the distances 00:02:22.429 --> 00:02:27.558 between the companies. Please be assured that the Commission 00:02:27.569 --> 00:02:29.758 will pay careful attention to the opinions that you 00:02:29.770 --> 00:02:33.080 provide to us today. 00:02:33.080 --> 00:02:36.800 As you can see, although you cannot see me. We are 00:02:36.808 --> 00:02:39.419 joined today by several panelists important to this 00:02:39.429 --> 00:02:42.490 proceeding. Each of them will have an opportunity to 00:02:42.500 --> 00:02:44.949 speak to you today. But for now, I'd like each of them 00:02:44.960 --> 00:02:47.490 to simply wave. 00:02:47.490 --> 00:02:51.149 Ms. Goldberg is the Advisor to Commissioner Reynolds 00:02:52.028 --> 00:02:55.919 and Commissioner Reynolds is also present. 00:02:55.919 --> 00:03:01.118 Mr. Robert Griffin is present for Calaveras. Cal-Ore 00:03:01.838 --> 00:03:09.569 Ducor, Foresthill, Kerman, Pinnacles, Ponderosa, Sierra 00:03:10.000 --> 00:03:16.629 Siskiyou and the Volcano Telephone Companies. Ms. Bixia Ye is present 00:03:16.710 --> 00:03:21.710 from the Public Advocates Office. 00:03:21.710 --> 00:03:25.229 A court reporter will be transcribing everything that 00:03:25.240 --> 00:03:29.770 is said today. Therefore as we all speak, we will 00:03:29.778 --> 00:03:33.618 need to speak slowly and clearly. So that the reporter 00:03:33.629 --> 00:03:37.469 can capture everything that is being said. 00:03:37.469 --> 00:03:41.028 When comments begin, I will ask you to remember to 00:03:41.038 --> 00:03:45.580 please spell your first and last name, and provide your 00:03:45.588 --> 00:03:48.139 location. 00:03:48.139 --> 00:03:52.319 A written transcript of today's hearing will be posted 00:03:52.330 --> 00:03:55.909 publicly on the docket cart for this proceeding, which 00:03:55.919 --> 00:04:00.368 is found on the Commission's website. The audio and 00:04:00.379 --> 00:04:03.300 visual feed of this Public Hearing is being recorded 00:04:04.000 --> 00:04:08.429 and is also accessible on the CPUC website. Therefore 00:04:08.439 --> 00:04:11.929 if you do not wish to be recorded, please do not provide 00:04:11.939 --> 00:04:23.519 public comments. 00:04:23.519 --> 00:04:27.088 Okay. 00:04:27.088 --> 00:04:31.600 Sorry for the delay in the beginning. But at this time 00:04:31.798 --> 00:04:34.959 we'd like to first hear from Commissioner John Reynolds. 00:04:35.230 --> 00:04:38.319 Commissioner Reynolds, would you make opening remarks 00:04:38.329 --> 00:04:42.238 please? Yes, thank you Judge Miles and good evening 00:04:42.250 --> 00:04:45.660 everyone. My name is John Reynolds and I'm the assigned 00:04:45.670 --> 00:04:49.048 Commissioner to this application. This joint application 00:04:49.350 --> 00:04:52.730 for determination of applicants cost of capital for 00:04:52.738 --> 00:04:56.178 ratemaking purposes. So we are virtual, there are 00:04:56.189 --> 00:04:58.170 many people ensuring that this evening's hearing goes 00:04:58.178 --> 00:05:01.369 smoothly. But I'd like to offer my thanks to Judge 00:05:01.379 --> 00:05:04.389 Miles, to the Communications Division, to the Public 00:05:04.399 --> 00:05:09.519 Advisors Office. To IT and to our court reporters 00:05:09.528 --> 00:05:13.428 for making today's meeting a reality. I also want to 00:05:13.439 --> 00:05:16.338 thank the public for their comments and for participating 00:05:16.350 --> 00:05:19.759 in this evening's hearing. Encourage customers to submit 00:05:19.769 --> 00:05:22.889 written comments through our Commission's Public Advisors 00:05:22.899 --> 00:05:26.160 Office. Or through the public comment tab on the docket 00:05:26.170 --> 00:05:29.439 card for this proceeding. In addition to your participation 00:05:29.449 --> 00:05:33.428 this evening, we look forward to hearing your voices. 00:05:33.439 --> 00:05:36.069 And I will turn things back over to you, Judge Miles. 00:05:37.769 --> 00:05:41.869 Thank you, Commissioner Reynolds. 00:05:41.869 --> 00:05:45.579 I will now provide a brief background about the proceeding. 00:05:48.129 --> 00:05:51.819 The California Public Utilities Commission is a state 00:05:51.829 --> 00:05:55.139 agency that decides how much money telephone corporations 00:05:55.149 --> 00:05:58.540 may earn, and the rates that will be included in consumer 00:05:58.548 --> 00:06:02.369 bills for telephone service. The Commission is 00:06:02.379 --> 00:06:05.988 headed by 5 Commissioners. They are appointed by 00:06:06.000 --> 00:06:08.980 the Governor and confirmed by the California State 00:06:08.988 --> 00:06:11.028 Senate. 00:06:11.028 --> 00:06:13.988 The purpose of today's hearing is for the Commission 00:06:14.000 --> 00:06:17.619 to receive comments from customers of the several telephone 00:06:17.629 --> 00:06:21.389 companies and from members of the public about the 00:06:21.399 --> 00:06:26.488 application that the companies filed in September 2022. 00:06:28.338 --> 00:06:30.798 The application requests that the Commission set a 00:06:30.809 --> 00:06:34.778 uniform cost of capital figure for all of the companies. 00:06:35.250 --> 00:06:38.129 That would then be used in company specific ratemaking 00:06:38.139 --> 00:06:40.959 determinations. 00:06:40.959 --> 00:06:46.069 Very generally cost of capital is an expected return 00:06:46.079 --> 00:06:51.350 or profit. From using capital sources such as equity 00:06:51.358 --> 00:06:57.048 or stock and debt or bonds. Hence, the cost of capital 00:06:57.059 --> 00:07:01.129 is a calculation of one the potential return expected 00:07:01.139 --> 00:07:05.170 by equity investors. Considering the risks inherent 00:07:05.178 --> 00:07:10.509 in the telecommunications industry. Two, an anticipated 00:07:10.519 --> 00:07:14.459 interest rate on debt telecommunication companies must 00:07:14.470 --> 00:07:17.858 pay in the future. Particularly under new rate structures 00:07:17.869 --> 00:07:23.569 resulting from rate cases. And three, a ratio of equity 00:07:23.579 --> 00:07:27.129 and debt which reflects a reasonable balance of capital 00:07:27.139 --> 00:07:32.149 sources for rate making purposes. 00:07:32.149 --> 00:07:35.399 The cost of capital that is established in this proceeding 00:07:35.410 --> 00:07:38.319 will then be implemented as part of company specific 00:07:38.329 --> 00:07:41.879 ratemaking determinations. In each of the rate cases 00:07:42.230 --> 00:07:48.269 that will be processed from 2022-2025. Including 00:07:48.278 --> 00:07:52.678 the rate cases that recently concluded in 2022, for 00:07:52.689 --> 00:07:57.108 Sierra, Siskiyou and Volcano. And the rate cases that are 00:07:57.119 --> 00:08:03.920 underway for Ponderosa, Foresthill and Kerman. 00:08:03.920 --> 00:08:07.410 During this cost of capital proceeding, the Commission 00:08:07.420 --> 00:08:11.199 will review company testimony about the risks within 00:08:11.209 --> 00:08:14.600 the environments where the companies operate. We will 00:08:14.608 --> 00:08:17.449 hear testimony of regulatory and financial experts 00:08:17.459 --> 00:08:21.639 as well. We will also hear testimony from the Public 00:08:21.649 --> 00:08:25.189 Advocates Office. 00:08:25.189 --> 00:08:29.689 And I want to state briefly that while the companies 00:08:29.699 --> 00:08:33.759 contend that a single weighted average cost of capital 00:08:33.908 --> 00:08:37.759 should be determined for all 10 companies. The Public 00:08:37.769 --> 00:08:41.269 Advocates argue that using one figure for all could 00:08:41.279 --> 00:08:46.269 result in an overall cost of capital. Which could artificially 00:08:46.279 --> 00:08:49.158 inflate the rate of return on rate base for some companies. 00:08:49.950 --> 00:08:53.678 Therefore, Public Advocates contend that this would 00:08:53.690 --> 00:08:56.830 provide some companies with returns on revenue. That 00:08:56.840 --> 00:08:59.269 are above what they require to ensure their ongoing 00:08:59.279 --> 00:09:02.950 financial health. You will hear from the parties and 00:09:02.960 --> 00:09:06.259 from the Public Advocates Office in a moment. And they 00:09:06.269 --> 00:09:09.918 will explain further their position. 00:09:09.918 --> 00:09:13.500 As the assigned Judge, I will manage the day to day 00:09:13.509 --> 00:09:17.548 activity during the proceedings. My role is to evaluate 00:09:17.558 --> 00:09:20.570 the evidence in the proceedings and to write a proposed 00:09:20.580 --> 00:09:25.210 decision based on that evidence. The 5 Commissioners 00:09:25.219 --> 00:09:28.899 including assigned Commissioner John Reynolds. Are the 00:09:28.908 --> 00:09:33.149 ones who will ultimately decide with a vote at a public 00:09:33.158 --> 00:09:36.308 meeting of the Commission. On whether to approve the 00:09:36.320 --> 00:09:40.479 telephone company's application. They will evaluate 00:09:40.489 --> 00:09:43.940 my proposed decision and will decide whether to adopt 00:09:43.950 --> 00:09:47.119 the proposed decision. Or to adopt their own alternate 00:09:47.129 --> 00:09:51.619 decision based on the evidence in the proceeding. The 00:09:51.629 --> 00:09:56.798 current schedule for this proceeding anticipates that 00:09:56.808 --> 00:09:59.700 the Commission will vote on the decision during the 00:09:59.710 --> 00:10:04.389 1st quarter of 2024. 00:10:04.389 --> 00:10:08.529 Now we'll have input from the parties, we will hear 00:10:08.538 --> 00:10:11.908 from the participants in the proceedings. Beginning 00:10:11.918 --> 00:10:15.609 with the representative for the company, Robert Griffin. 00:10:15.879 --> 00:10:26.298 Mr. Griffin, would you please proceed? 00:10:26.298 --> 00:10:29.889 Yes, good afternoon. Uh, my name is Robert Griffin, 00:10:29.899 --> 00:10:33.190 Vice President and General Manager of Sierra Telephone 00:10:33.200 --> 00:10:36.509 Company Incorporated. Speaking on behalf of this Small 00:10:36.519 --> 00:10:39.320 LEX. 00:10:39.320 --> 00:10:41.849 Pursuant to the ruling of the Administrative Law Judge 00:10:41.859 --> 00:10:44.918 in this proceeding, Judge Miles. I am providing an overview 00:10:44.928 --> 00:10:48.489 of the cost of capital application that was filed with 00:10:48.500 --> 00:10:51.109 the California Public Utilities Commission on September 00:10:51.119 --> 00:10:55.769 the 1st of 2022, as Judge Miles mentioned. 00:10:55.769 --> 00:10:59.109 Cost of Capital Application is followed by 10 very 00:10:59.119 --> 00:11:03.548 small rural telephone companies. Referred to in proceedings 00:11:03.558 --> 00:11:09.349 such as this as the Independent Small Local Exchange 00:11:09.359 --> 00:11:12.399 Carriers or Independent Small LEX, you may hear it 00:11:12.408 --> 00:11:16.190 referred to. This distinguishes the companies from 00:11:16.200 --> 00:11:19.558 other small providers who are affiliated with larger 00:11:19.629 --> 00:11:23.080 more heavily capitalized and diversified carriers. 00:11:24.509 --> 00:11:27.519 Um, to reiterate what Judge Miles mentioned. The 10 00:11:27.529 --> 00:11:31.639 companies in this proceeding are: Calaveras Telephone 00:11:31.649 --> 00:11:37.219 company, Cal-Ore Telephone Company, Ducor Telephone Company, 00:11:37.690 --> 00:11:41.759 Foresthill Telephone Company, Kerman Telephone Company, 00:11:43.019 --> 00:11:46.779 Pinnacles Telephone Company, the Ponderosa Telephone Company, 00:11:47.500 --> 00:11:51.969 Sierra Telephone Company Inc., the Siskiyou Telephone 00:11:51.979 --> 00:11:57.399 Company and Volcano Telephone Company. 00:11:57.399 --> 00:12:01.239 These 10 companies are family-run, community-oriented 00:12:01.250 --> 00:12:04.830 companies and most have existed for at least 100 years. 00:12:05.418 --> 00:12:08.918 They are carriers of last resort. And as such, have 00:12:08.928 --> 00:12:12.389 an obligation to provide a basic local telephone service 00:12:13.139 --> 00:12:16.269 to their customers who reside in rural, rugged and 00:12:16.279 --> 00:12:20.019 remote areas of California. They are regulated on a 00:12:20.029 --> 00:12:24.538 traditional rate of return or cost of service basis. 00:12:24.830 --> 00:12:28.070 And as such, they are required to continue to maintain 00:12:28.080 --> 00:12:32.759 and upgrade their networks. The cost of capital application 00:12:32.769 --> 00:12:36.619 requests an overall cost of capital of 13.2%. For each 00:12:36.629 --> 00:12:40.928 of these 10 Independent Small LEX. Supporting company 00:12:40.940 --> 00:12:44.690 and expert testimony was filed, that shows the risks 00:12:44.700 --> 00:12:48.178 of the companies. In the current operating environment, 00:12:48.190 --> 00:12:51.950 including their liquidity. 00:12:51.950 --> 00:12:55.399 The existing cost of capital rates simply do not reflect 00:12:55.408 --> 00:12:58.859 the current risk profile of any of the 10 companies 00:12:59.570 --> 00:13:02.710 and the associated regulatory risks of providing raw 00:13:02.719 --> 00:13:07.058 telecommunications service in California. Both of which 00:13:07.070 --> 00:13:10.369 negatively impact the company's ability to attract 00:13:10.989 --> 00:13:13.950 necessary capital. 00:13:13.950 --> 00:13:16.418 It's important to note that the cost of capital application 00:13:16.428 --> 00:13:19.879 does not propose to change any basic residential or 00:13:19.889 --> 00:13:24.038 basic business rates for the customer. The Commission 00:13:24.048 --> 00:13:26.750 controls the customer rates that these companies charge 00:13:26.908 --> 00:13:30.580 and also determines the reasonable costs of providing 00:13:30.590 --> 00:13:34.109 regulated services. And so therefore, establishes the 00:13:34.119 --> 00:13:37.399 overall revenues available to recover those costs. 00:13:39.259 --> 00:13:42.038 This proceeding will determine the cost of capital 00:13:42.048 --> 00:13:45.308 that will be applied in connection with the individual 00:13:45.320 --> 00:13:49.519 companies prior, pending and future rate cases with 00:13:49.529 --> 00:13:54.950 test years ranging from 2023-2025. This is 00:13:54.960 --> 00:13:58.070 a proceeding separate from each of the company's individual 00:13:58.080 --> 00:14:01.440 rate case proceedings which are filed every 5 years 00:14:01.450 --> 00:14:05.529 under the Commission's rate case plan. 00:14:05.529 --> 00:14:08.259 There's also a couple of cases and these are included 00:14:08.269 --> 00:14:11.330 the pending rate cases of Foresthill, Ponderosa Telephone 00:14:11.340 --> 00:14:15.058 Company and Kerman Telephone. That may include changes 00:14:15.070 --> 00:14:17.769 to residential and or business telephone rates, but 00:14:17.788 --> 00:14:20.989 those are in process. 00:14:20.989 --> 00:14:25.058 The cost of capital itself is a ratemaking component 00:14:25.070 --> 00:14:28.918 that reflects the utilities cost of generating capital. 00:14:28.928 --> 00:14:33.080 To invest in regulated, regulated utility infrastructure. 00:14:34.678 --> 00:14:37.769 It is also known as the rate of return, as it defines 00:14:37.779 --> 00:14:41.109 the target return. On the utilities capital that must 00:14:41.119 --> 00:14:45.658 be used in setting rates. Cost of capital is a measurement 00:14:45.668 --> 00:14:49.570 of the cost of obtaining debt and equity financing. 00:14:50.288 --> 00:14:53.200 It reflects the amount that investors would demand 00:14:53.580 --> 00:14:57.580 to compensate for their risks of investing capital 00:14:57.590 --> 00:15:02.538 in each company or in the company. Generally capital 00:15:02.548 --> 00:15:05.389 can be borrowed or it can be generated by investors. 00:15:05.399 --> 00:15:09.058 In the form of equity contributions or retained earnings. 00:15:09.820 --> 00:15:12.668 A combination of those factors results in the overall 00:15:12.678 --> 00:15:17.340 cost of capital. Now, in setting the utilities rate 00:15:17.349 --> 00:15:20.658 structure. The cost of capital is reflected as a target 00:15:20.668 --> 00:15:26.019 rate of return on the rate base. The rate base is calculated 00:15:26.029 --> 00:15:29.509 in each company's general rate case. And is the value 00:15:29.808 --> 00:15:34.058 of their plants, and equipment investments and some 00:15:34.070 --> 00:15:36.769 expenditures. That is reasonably necessary to provide 00:15:36.779 --> 00:15:40.840 a regulated telephone service and also provide access 00:15:40.849 --> 00:15:45.570 to advanced services. Multiplying the rate of return 00:15:45.580 --> 00:15:49.570 by the rate base. Yields the target return on the investment 00:15:49.580 --> 00:15:53.590 which is used in ratemaking. Cost of capital is simply 00:15:53.599 --> 00:15:59.450 not capital for investment. So in 2016, the Commission 00:15:59.460 --> 00:16:04.158 adopted individual cost of capital rates for each Independent 00:16:04.168 --> 00:16:11.038 Small LEX, with rates that range from 8.4% to 9.22 00:16:11.298 --> 00:16:14.558 I believe is the highest and applied it to their prior 00:16:14.570 --> 00:16:17.739 rate cases initiated under the first round of the rate 00:16:17.750 --> 00:16:23.719 case for test years 2017-2019. 00:16:23.719 --> 00:16:27.099 In that decision, it was directed that the cost of 00:16:27.109 --> 00:16:30.869 capital determinations should be considered in individual 00:16:30.879 --> 00:16:35.340 general rate cases after December 2020. Or in another 00:16:35.349 --> 00:16:39.038 generate cost of capital proceeding. Based on an agreement 00:16:39.048 --> 00:16:42.090 with the Public Advocates Office of the Commission. 00:16:42.099 --> 00:16:45.349 Cal Advocates, who are also on this uh, Public Participation 00:16:45.359 --> 00:16:48.389 Hearing. So between them and the Independent Small 00:16:49.099 --> 00:16:53.469 LEX. The Commission approved our unopposed proposal to initiate 00:16:53.570 --> 00:16:57.308 this consolidated cost of capital proceeding. To address 00:16:57.320 --> 00:17:02.639 each company in, in one swoop and apply those rates 00:17:02.649 --> 00:17:08.250 with test years of 2023-2025. 00:17:08.250 --> 00:17:11.279 In this proceeding, the Independent Small LEX are each 00:17:11.289 --> 00:17:18.588 seeking a 13.20% or 13.22% cost of capital. So that they 00:17:18.598 --> 00:17:21.930 are able to respond to and mitigate against the continuing 00:17:21.939 --> 00:17:25.299 enhanced risks of the current rural telecommunications 00:17:25.309 --> 00:17:29.188 environment. So we can ensure the continued viability 00:17:29.198 --> 00:17:32.708 of investments in rural telecommunications infrastructure 00:17:33.087 --> 00:17:36.888 and to provide proper incentives to maintain and upgrade 00:17:36.898 --> 00:17:40.567 broadband capable facilities. In the rural areas of 00:17:40.577 --> 00:17:44.930 California to keep our rural customers on the right 00:17:44.939 --> 00:17:48.309 side of the digital, the digital divide. Excuse me. 00:17:50.420 --> 00:17:53.959 Constitutional standards govern the determination of 00:17:53.969 --> 00:17:57.699 a fair rate of return for regulated, regulated utilities 00:17:57.709 --> 00:18:02.039 set by agencies such as the Ccommission. And they also 00:18:02.049 --> 00:18:05.098 entitle a public utility to a cost of capital that 00:18:05.108 --> 00:18:08.078 is commensurate with returns on investments, in other 00:18:08.088 --> 00:18:12.098 enterprises. Having corresponding risks and uncertainties, 00:18:12.420 --> 00:18:15.469 and that is it sufficient to assure confidence in the 00:18:15.479 --> 00:18:20.348 financial integrity of the company. 00:18:20.348 --> 00:18:23.630 Simply so that they can, they can maintain its credit 00:18:23.640 --> 00:18:27.689 and be able to attract capital. 00:18:27.689 --> 00:18:32.000 In this proceeding, on May 24, 2023, Cal Advocates 00:18:32.009 --> 00:18:35.209 submitted testimony responding to the company's cost 00:18:35.219 --> 00:18:39.910 of capital application and its testimonies. 00:18:39.910 --> 00:18:43.699 Cal Advocates is proposing a company specific cost of capital 00:18:43.709 --> 00:18:48.680 for each company. Within the ranges of the low of 5.72% 00:18:48.689 --> 00:18:54.180 up to 7%. Based on a mechanical and complex formula, 00:18:54.529 --> 00:18:57.539 these are far lower rates than we've seen in the last 00:18:57.549 --> 00:19:02.170 5 years since 2016. Cal Advocates testimony disputes the 00:19:02.180 --> 00:19:06.309 material and growing regulatory risks of the companies 00:19:06.598 --> 00:19:11.059 that unavoidably impact investment decisions. 00:19:12.019 --> 00:19:15.328 It also discounts the company's illiquidity as a risk 00:19:15.338 --> 00:19:19.380 factor impacting their cost of capital. Cal Advocates 00:19:19.390 --> 00:19:22.130 state, their proposal is designed to ensure that the 00:19:22.140 --> 00:19:25.279 surcharge rate will not overburden ratepayers. That 00:19:25.289 --> 00:19:28.598 the customers will see the impact on their higher bills. 00:19:28.959 --> 00:19:31.769 The Independent Small LEX proposal would barely equate 00:19:31.779 --> 00:19:35.039 to a one cent impact on surcharges for all California 00:19:35.049 --> 00:19:38.969 ratepayers. Cal Advocates proposal itself would only equate 00:19:38.979 --> 00:19:45.969 to a 0.7 cent impact. So I mean, the Small LEX proposal 00:19:45.979 --> 00:19:49.719 is not materially going to impact the rate. That pay 00:19:49.729 --> 00:19:53.729 that our customers pay in, in any sense. Not material 00:19:53.739 --> 00:19:58.170 at all but in, in each of the Independent Small 00:19:58.180 --> 00:20:02.130 LEX rate cases. This same advocate for the public advocating 00:20:02.140 --> 00:20:05.150 for you, the customer. Has proposed much, much higher 00:20:05.160 --> 00:20:08.729 rates for rural customers, than the companies have proposed 00:20:08.739 --> 00:20:11.900 themselves. And that impact of multiple dollars is 00:20:11.910 --> 00:20:14.818 far, far higher than anything that would come of this 00:20:14.828 --> 00:20:18.140 cost of capital proceeding. 00:20:18.140 --> 00:20:20.989 Its expert claims that the risks faced by these small 00:20:21.000 --> 00:20:24.509 rural telephone companies are lower than those of large 00:20:24.519 --> 00:20:29.469 publicly traded companies like Amazon or Apple. Those 00:20:29.479 --> 00:20:32.969 that can mitigate their risk through size and diversification 00:20:33.949 --> 00:20:36.910 in support of its cost of capital proposal. Cal Advocates 00:20:36.920 --> 00:20:40.989 expert also uses proxy or so called comparable groups. 00:20:41.000 --> 00:20:44.739 Of significantly larger electric and telephone companies 00:20:44.890 --> 00:20:49.430 such as Con Edison, Sempra Energy, AT&T and Frontier. 00:20:51.858 --> 00:20:55.559 A cost of capital proposal would result in a significant 00:20:55.568 --> 00:20:58.180 decrease to the company's cost of capital. That the 00:20:58.189 --> 00:21:02.640 Commission adopted as reasonable, in 2016. The companies 00:21:02.650 --> 00:21:05.209 are committed to providing customers in their rural 00:21:05.219 --> 00:21:09.009 service areas. With access to high quality voice and 00:21:09.019 --> 00:21:13.358 broadband services. However, we're very concerned that 00:21:13.549 --> 00:21:17.729 the proposal that Cal Advocates puts forth is so low. That 00:21:17.739 --> 00:21:20.979 it will impact the abilities to attract necessary capital. 00:21:20.989 --> 00:21:25.088 Which we need to invest in our infrastructure that 00:21:25.098 --> 00:21:28.439 could benefit rural consumers and ultimately help bridge 00:21:28.449 --> 00:21:32.719 any digital divide. Next steps in this proceeding, 00:21:32.729 --> 00:21:36.660 the company's rebuttal testimony is due on June 30 00:21:36.670 --> 00:21:40.789 of this year 2023. Remote evidential hearings are scheduled, 00:21:40.799 --> 00:21:44.459 I believe for August 14th through the 18th of 2023. 00:21:44.709 --> 00:21:48.259 With a decision expected, my understanding is by the 00:21:48.269 --> 00:21:50.608 end of the year. 00:21:50.608 --> 00:21:54.500 Um, I'd like to thank you, our customers. In advance to 00:21:55.358 --> 00:21:59.250 your interest and input to this proceeding. And thank 00:21:59.259 --> 00:22:02.009 you Your Honor, Judge Miles and Commissioner John Reynolds. 00:22:02.019 --> 00:22:05.130 and all other Staff for hosting this. PPH. I appreciate 00:22:05.140 --> 00:22:08.420 it. 00:22:08.420 --> 00:22:11.420 Thank you, Mr Griffin. 00:22:11.420 --> 00:22:15.430 We will now hear from the Public Advocates Office. 00:22:16.630 --> 00:22:21.358 Ms. Bixia Ye, are you available? 00:22:21.358 --> 00:22:26.848 Yes, Your Honor. Thank you. I'd appreciate it before 00:22:26.858 --> 00:22:30.019 you make your remarks. If you would first explain the 00:22:30.029 --> 00:22:35.368 role of the Public Advocates Office very briefly. 00:22:35.368 --> 00:22:38.229 Yes, I will. 00:22:38.229 --> 00:22:41.098 Thank you. 00:22:41.098 --> 00:22:46.078 Yeah, good evening everyone. My name is Bixia Ye from the 00:22:46.088 --> 00:22:50.769 Public Advocates Office at the California Public Utilities 00:22:50.779 --> 00:22:55.769 Commission, also known as Cal Advocates. Uh next slide, please. 00:22:59.209 --> 00:23:03.660 Uh, Cal Advocates is an independent customer advocate 00:23:03.670 --> 00:23:07.729 group within the Commission. We advocate on behalf 00:23:07.739 --> 00:23:12.539 of California ratepayers statewide. Our statutory mission 00:23:12.549 --> 00:23:16.650 is to obtain the lowest possible rate for serving, 00:23:16.660 --> 00:23:21.299 consistent with safe, reliable, serving and the state's 00:23:21.309 --> 00:23:26.358 environmental goals. We also strive to ensure that 00:23:26.368 --> 00:23:31.098 no one is left behind. And all communities have access 00:23:31.108 --> 00:23:37.088 to safe and affordable electric, gas, water and communication 00:23:37.098 --> 00:23:42.348 service, including broadband service. Proposing a reasonable 00:23:42.358 --> 00:23:46.699 cost of capital for companies. Will ensure customers 00:23:46.709 --> 00:23:50.640 obtain the lowest possible rate for their service. 00:23:51.479 --> 00:23:55.009 Next slide, please? 00:23:55.009 --> 00:24:00.059 Um, so why is the cost of capital important to you? Because 00:24:00.068 --> 00:24:04.299 it impacts your telephone bill. The higher the authorized 00:24:04.430 --> 00:24:08.049 uh cost of capital, the higher the amount of state 00:24:08.059 --> 00:24:12.789 subsidy paid by California ratepayers, statewide. The 00:24:12.799 --> 00:24:16.189 higher the state subsidy, the higher your telephone 00:24:16.199 --> 00:24:20.799 bill will be. In this proceeding, the Commission will 00:24:20.809 --> 00:24:25.759 determine a reasonable cost of capital for 10 small 00:24:25.769 --> 00:24:31.779 independent local exchange carriers or Small ILECs. The 00:24:31.789 --> 00:24:37.239 adopted cost of capital will be the small authorized 00:24:37.250 --> 00:24:41.259 rate of return on their investment. Which allow the 00:24:41.269 --> 00:24:46.199 company to deliver safe, reliable and high quality 00:24:46.209 --> 00:24:51.588 service community, communication service. 00:24:51.588 --> 00:24:55.338 All of the small ILECS rely on the Commission's monetary 00:24:55.348 --> 00:24:59.358 support. To meet their authorized return on investment. 00:25:00.009 --> 00:25:03.848 The Commission provide monetary support are fund by 00:25:03.858 --> 00:25:08.890 California ratepayers record as a surcharge on every 00:25:08.900 --> 00:25:12.368 customer's telephone bill. 00:25:12.368 --> 00:25:16.410 To ensure the lowest possible rate for serving. It 00:25:16.420 --> 00:25:20.420 is critical for the Commission to determine a reasonable 00:25:20.430 --> 00:25:24.259 cost of capital for the Small ILECs, in this proceeding. 00:25:25.549 --> 00:25:28.420 Next slide, please. 00:25:28.420 --> 00:25:32.469 Then what is the cost of capital? It is a reasonable 00:25:32.479 --> 00:25:36.910 cost of financing a company's business operation, and 00:25:36.920 --> 00:25:40.969 a return that the company is back to receive, for their 00:25:40.979 --> 00:25:46.380 investment. Companies investment need the money and 00:25:46.390 --> 00:25:51.368 the money come from either the company's shareholder 00:25:51.380 --> 00:25:56.078 or by borrowing from the banks. Both ways have their 00:25:56.088 --> 00:26:02.039 respective advantages and risk to determine a reasonable 00:26:02.049 --> 00:26:06.469 cost of capital. In this proceeding, the Commission 00:26:06.479 --> 00:26:10.160 should look at whether the company have managed their 00:26:10.170 --> 00:26:16.150 money efficiently. Next slide, please. 00:26:16.150 --> 00:26:21.118 Currently, the Small ILECS authorized cost of capital 00:26:21.130 --> 00:26:27.650 went from 8.44% to 9.22%. 00:26:27.650 --> 00:26:33.170 In their joint application, the Small ILECs is asking for an 00:26:33.180 --> 00:26:39.189 increase of the cost of capital to 13.2%, in this proceeding. 00:26:40.868 --> 00:26:44.559 Cal Advocates have served our testimony last month 00:26:44.779 --> 00:26:48.709 and we propose the cost of capital for each of the 00:26:48.719 --> 00:26:56.838 Small ILECs range from 5.72% to 7%. Our proposal is 00:26:56.848 --> 00:27:02.088 based on the analysis of the Small ILECs business operation. 00:27:02.439 --> 00:27:05.630 They are comparable companies in the United States 00:27:05.920 --> 00:27:10.598 and the current market conditions. Most importantly 00:27:10.608 --> 00:27:15.068 our proposal ensure the surcharge rates will not overburden 00:27:15.078 --> 00:27:19.160 California ratepayers. And at the same time, provide 00:27:19.170 --> 00:27:23.400 companies a fair opportunity to earn their reasonable 00:27:23.410 --> 00:27:29.529 return on investment. Next slide, please. 00:27:29.529 --> 00:27:32.890 We want to hear from you regarding your opinions on 00:27:32.900 --> 00:27:37.078 this proceeding. Here is my contact information. If 00:27:37.088 --> 00:27:41.068 you have any questions regarding this proceeding, I 00:27:41.078 --> 00:27:44.539 will be happy to answer them for you. Your presence 00:27:44.549 --> 00:27:49.709 here is greatly appreciated and we look forward to listening 00:27:49.719 --> 00:27:56.219 to your comments and concerns. Thank you. 00:27:56.219 --> 00:28:02.239 Thank you, Ms. Ye for your presentation. 00:28:02.239 --> 00:28:08.380 Okay. Now this, I'm sorry. 00:28:08.380 --> 00:28:12.588 To this time, I'd like to give a reminder to callers. 00:28:15.029 --> 00:28:18.759 If you are participating today and you would like to 00:28:18.769 --> 00:28:23.979 provide public comments. You may do so by calling 1- 00:28:23.989 --> 00:28:39.930 800-857-1917, enter passcode 1765767# and press *1 00:28:39.939 --> 00:28:44.719 on your phone. This will alert the operator who 00:28:44.729 --> 00:28:48.979 will begin to line up public speakers. Please provide 00:28:48.989 --> 00:28:53.559 your name and spell it. And if you are a Public Official, 00:28:53.680 --> 00:28:56.969 please notify the operator of your title and position, 00:28:57.539 --> 00:29:01.559 in addition to your name. Please refer to the slide 00:29:01.568 --> 00:29:06.380 on the screen. It is important to remind you that this 00:29:06.390 --> 00:29:09.259 is not the time and place to ask personal questions, 00:29:09.469 --> 00:29:13.098 such as a question about your bill or service. And 00:29:13.108 --> 00:29:17.049 that is because we are recording this session. And this 00:29:17.059 --> 00:29:20.259 session is viewed by the public. And you don't want 00:29:20.269 --> 00:29:23.029 your individual phone number or resident's address 00:29:23.039 --> 00:29:26.660 revealed for personal questions. There are telephone 00:29:26.670 --> 00:29:29.459 customer service representatives available to assist 00:29:29.469 --> 00:29:35.328 you. And you can find more information on this by going 00:29:35.338 --> 00:29:38.150 to 00:29:38.150 --> 00:29:47.390 cpuc.ca.gov/pph. There you will 00:29:47.400 --> 00:29:49.709 find the phone numbers to reach your customer service 00:29:49.719 --> 00:29:53.500 representative for your company. A reminder again to 00:29:53.509 --> 00:29:57.078 press*1 on your phone, so that the operator can 00:29:57.088 --> 00:30:01.348 begin to form a speaking queue. When you are admitted 00:30:01.358 --> 00:30:05.910 to the meeting to speak, please speak slowly and clearly. 00:30:06.848 --> 00:30:09.539 So that the court reporter may accurately transcribe 00:30:09.549 --> 00:30:13.189 your comments. When the operator lets you know that 00:30:13.199 --> 00:30:16.660 it is your turn to speak. Please start your comments 00:30:16.670 --> 00:30:19.250 by providing your full name and spelling your last 00:30:19.259 --> 00:30:23.088 name and location. We will be able to hear you best 00:30:23.098 --> 00:30:27.130 If you speak directly into your phone or headset, please 00:30:27.140 --> 00:30:29.449 try to avoid having your phone on speaker, when you 00:30:29.459 --> 00:30:33.489 are providing comment. Your comments will be recorded 00:30:34.229 --> 00:30:36.779 and a reporter is making a written transcript of today's 00:30:36.789 --> 00:30:42.088 hearing. As I stated earlier, these will be posted publicly 00:30:42.098 --> 00:30:46.059 on the docket card for this proceeding. In addition, 00:30:48.588 --> 00:30:52.118 written comments on the application may be submitted 00:30:52.189 --> 00:30:55.828 on the docket card. For this proceeding, which can be 00:30:55.838 --> 00:31:00.469 found by going to the Commission's website: 00:31:00.469 --> 00:31:11.539 apps.cpuc.ca.gov/c 00:31:12.269 --> 00:31:20.699 /A2209003. 00:31:20.699 --> 00:31:23.848 To ensure that everyone has a chance to provide comment. 00:31:24.489 --> 00:31:27.568 Each speaker will have a time limit of 90 seconds or 00:31:27.578 --> 00:31:30.170 1 and a half minutes. 00:31:30.170 --> 00:31:35.160 A chime will sound when your time is up. 00:31:35.160 --> 00:31:38.729 Operator, are there any Public Officials on the line? 00:31:43.039 --> 00:31:47.799 There are no Public Officials on the line? Okay. So then 00:31:47.809 --> 00:31:51.430 we will proceed to hear from the first person in queue. 00:31:52.838 --> 00:31:55.568 Operator, would you please announce the first commenter? 00:31:59.838 --> 00:32:02.289 And Your Honor there are no, there are no speakers 00:32:02.299 --> 00:32:04.400 in the public comment for the telephone line at this 00:32:04.410 --> 00:32:09.108 time. 00:32:09.108 --> 00:32:12.250 Okay. But for those of you, if you wish to speak 00:32:12.259 --> 00:32:14.348 during the public comment period. Please press *1, 00:32:14.358 --> 00:32:17.160 unmute your phone. And clearly provide your name 00:32:17.170 --> 00:32:24.479 and organization when prompted. 00:32:24.479 --> 00:32:30.059 Okay well. What we'll do, because it is 5:49. Uh, may I 00:32:30.068 --> 00:32:33.189 suggest that we 00:32:33.189 --> 00:32:37.160 take about a 00:32:37.160 --> 00:32:40.199 10 minute break. To give the court reporter a moment 00:32:40.699 --> 00:32:43.989 and return at 6p.m. To see if we now have any 00:32:44.000 --> 00:32:52.479 callers, is that acceptable to everyone? 00:32:52.479 --> 00:32:56.969 That works for me. Okay. Okay So we'll go off the record, 00:32:57.989 --> 00:33:01.838 and return at 6p.m. If there, if there is anyone 00:33:01.848 --> 00:33:05.858 who is listening, who wants to make a public comment. 00:33:07.078 --> 00:33:11.250 Uh, please feel free to call in and we'll put you first 00:33:11.259 --> 00:33:14.880 in queue when we return from the break at 6p.m. Thank 00:33:14.890 --> 00:33:26.269 you. 00:33:26.269 --> 00:33:28.838 The feed for this streaming event brought to you by 00:33:28.848 --> 00:33:32.279 adminmonitor.com will begin momentarily. 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Thank 00:43:01.458 --> 00:43:13.219 you for your patience. 00:43:13.219 --> 00:43:15.809 The feed for this streaming event brought to you by 00:43:15.820 --> 00:43:19.228 adminmonitor.com will begin momentarily. Thank 00:43:19.239 --> 00:43:23.739 you for your patience. 00:43:23.739 --> 00:43:27.599 Good evening everyone. We're back on the record. 00:43:27.599 --> 00:43:31.010 Uh Operator, are there any speakers who have joined 00:43:31.019 --> 00:43:34.039 us on the public comment telephone line? There 00:43:34.050 --> 00:43:36.530 are no speakers on the public comment telephone line. 00:43:38.168 --> 00:43:42.010 Okay. Um. 00:43:42.010 --> 00:43:45.760 Okay. So we've taken a 10 minute break to give callers 00:43:45.769 --> 00:43:50.458 an opportunity to join us. And because we have not had 00:43:50.469 --> 00:43:53.878 any additional callers. I'm going to recommend that 00:43:53.889 --> 00:43:58.429 we adjourn in momentarily. I would like to thank everyone 00:43:58.438 --> 00:44:03.699 who participated today. And I would like to say to any 00:44:03.708 --> 00:44:07.570 callers who may be listening uh, but have chosen not 00:44:07.579 --> 00:44:10.849 to call in. If you would like to provide additional 00:44:10.860 --> 00:44:14.398 comments, you may submit written comments on the docket 00:44:14.409 --> 00:44:17.449 card for this proceeding. Which can be found on the 00:44:17.458 --> 00:44:28.639 Commission's website at apps.cpuc.ca. 00:44:29.030 --> 00:44:42.000 gov/c/A2209003 00:44:42.010 --> 00:44:45.119 And just to be clear, there's no dash in the number. Uh, 00:44:45.128 --> 00:44:54.039 it's A2209003. If anyone is listening, who needs assistance 00:44:54.050 --> 00:44:57.469 in providing comments. Please feel free to call the 00:44:57.478 --> 00:45:01.610 Commission's Public Advisors Office. The Public Advisor 00:45:01.619 --> 00:45:04.829 is not a party to the proceedings. They exist to help 00:45:04.840 --> 00:45:09.079 the public in matters such as this. And you may reach 00:45:09.090 --> 00:45:21.260 them by email at: public.advisor@ 00:45:22.139 --> 00:45:28.579 cpuc.ca.gov 00:45:28.579 --> 00:45:31.789 Commissioner John Reynolds, if you are still with us. 00:45:31.800 --> 00:45:35.500 Would you like to add any additional comments? Thank 00:45:35.510 --> 00:45:38.398 you, Judge Miles. I would like to just briefly thank 00:45:38.409 --> 00:45:41.148 you. Thank all of our Staff for making this Hearing 00:45:41.159 --> 00:45:43.500 available to members of the public. For anyone who's 00:45:43.510 --> 00:45:46.079 been listening in. I appreciate your attendance and 00:45:46.090 --> 00:45:47.820 thank you to the parties for your presence as well 00:45:50.429 --> 00:45:54.309 Thank you, Commissioner Reynolds. 00:45:54.309 --> 00:45:57.949 This concludes this evening's Public Participation 00:45:57.958 --> 00:45:59.969 Hearing. 00:45:59.969 --> 00:46:01.679 And we will now be off the record.