ARCHIVED -  Telecom Costs Order CRTC 99-1

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Telecom Costs Order
CRTC 99-1
Ottawa, 18 February 1999
File No.: 8085-RP0007/98
Application for costs by the Consumers’ Association of Canada, Alberta Branch (CACAlta).
1. Pursuant to Form of Regulation for TELUS Communications (Edmonton) Inc., Telecom Public Notice CRTC 98-3 (PN 98-3), 23 February 1998, the Commission initiated a proceeding to determine the appropriate regulatory regime for TELUS Communications (Edmonton) Inc. (TCEI) to be implemented after the expiry of the Directive to the Canadian Radio-television and Telecommunications Commission on the Regulation of Edmonton Telephones Corporation and ED TEL Communications Inc., P.C. 1994-1779, 25 October 1994. CACAlta intervened in the proceeding, and by letter dated 26 August 1998 applied for costs. TCEI filed its answer on 14 September 1998. CACAlta filed its reply on 23 September 1998.
2. The Commission notes that it was informed by letter dated 2 December 1998 that TCEI and TELUS Communications Inc. (TCI) would be amalgamated, effective 1 January 1999.
3. CACAlta submitted that it had met the criteria for costs set out in section 44(1) of the CRTC Telecommunications Rules of Procedure (the Rules), in that:
(a) CACAlta is representative of residential customers within the City of Edmonton and the Province of Alberta, who have an interest in the proceeding, as it will directly affect the rates charged to telephone customers of TCEI and competitive entrants in the City of Edmonton;
(b) CACAlta participated in a responsible manner in the proceeding by filing interrogatories with the company, submitting evidence in accordance with PN 98-3 and filing both argument and reply; and
(c) CACAlta contributed to a better understanding of the issues by the Commission.
4. In its answer, TCEI questioned the award of costs claimed by CACAlta. TCEI first noted that another consumer group, the Alberta Council on Aging (ACA), has also intervened in the proceeding and claimed that it represents a significant class of subscribers in TCEI’s territory. Accordingly, TCEI submitted that there is a duplication of representation at issue.
5. TCEI further submitted that CACAlta may not have contributed to a better understanding of the issues by the Commission. TCEI stated that it is not aware of any interrogatories raised by CACAlta which appear to have developed an issue in the mind of the Commission in the later interrogatory phases. TCEI submitted that most of the issues raised by CACAlta, such as the notion that a benchmarking exercise to see if TCEI’s operating expenses exceed "Canadian norms", were of no assistance in contributing to a better understanding of the issues by the Commission. TCEI also stated that it is difficult to distinguish what CACAlta filed as evidence from what other parties would generally file as argument. TCEI suggested that the evidence regarding appropriate rates of return and capital structure awarded by energy regulators cannot reasonably be regarded as contributing to a better understanding of the issues by the Commission. TCEI also suggested that the fact that CACAlta’s evidence did not attract interrogatories from the Commission or any other party is telling.
6. TCEI submitted that CACAlta’s argument also did not appear to contribute to a better understanding of the issues. TCEI stated that in some cases, CACAlta was "oblivious to previous Commission orders", in particular, in assuming that the Commission had incorporated a quality of service factor into its price cap equation, contrary to the Commission’s express conclusions on this point in Price Cap Regulation and Related Issues, Telecom Decision CRTC 97-9, 1 May 1997. TCEI also noted that in its comments on charitable donations, CACAlta seemed to be unaware of the Commission’s well-established treatment of such items.
7. In summary, TCEI stated that CACAlta’s participation has not particularly contributed to the Commission’s understanding of the issues which must be determined in the proceeding. Accordingly, TCEI submitted that CACAlta’s claim for an award of costs should be scrutinized carefully by the Commission to see if it truly merits an award of costs.
8. In reply, CACAlta submitted that its evidence has been organized, focused on specific issues of interest to its constituency and telephone customers generally, has displayed a fundamental grasp of the principles of regulation (both traditional and incentive-based) and of the practices of the Commission and other regulatory tribunals, and that its evidence has much to offer participants and the Commission.
9. With respect to TCEI’s submission regarding duplication of representation, CACAlta noted that the Commission has, for a number of years, given both ACA and CACAlta standing in the same proceedings. CACAlta also stated that ACA represents seniors, and that CACAlta represents a broader category of residential subscribers with somewhat different needs and outlooks, and that it was the only representative of the general body of residential subscribers in these proceedings. CACAlta noted that no other party adduced evidence on many of the matters raised by CACAlta, including issues of capital structure and return on equity, which, in CACAlta’s view, TCEI did not address adequately. CACAlta also stated that the fact that its evidence did not attract questions indicates that it was complete and clear, and required no clarification. CACAlta also stated that TCEI was misinterpreting CACAlta’s evidence regarding quality of service.
10. CACAlta submitted that TCEI’s answer to its claim for an award of costs is a "thinly veiled criticism of public participation in the process" and that it is "somewhat surprising for a regulated company providing a public service to employ this tactic". CACAlta stated that its evidence, argument and reply have discussed ideas that have merit and application for TCEI and that the claim for an award of costs by CACAlta should be upheld by the Commission.
11. In the Commission’s view, CACAlta has satisfied the first criteria set out in section 44(1) of the Rules for an award of costs. CACAlta is representative of the general body of residential subscribers, a class that has an interest in the outcome of the proceeding, and that will receive a benefit or suffer a detriment as a result of the decision resulting from the proceeding, in terms of the level of local rates. There is no merit to TCEI’s suggestion that there is in this case a duplication of representation at issue.
12. In the Commission’s view, CACAlta has also satisfied the second criteria, participation in a responsible manner.
13. With respect to the third criteria, contribution to a better understanding of the issues by the Commission, the Commission concurs with TCEI that, in several respects, CACAlta has not met this criteria.
14. For example, in its evidence and argument regarding an appropriate rate of return on average common equity (ROE), CACAlta recommended a lower ROE than it had proposed for TCI in the proceeding leading to Implementation of Price Cap Regulation and Related Issues, Telecom Decision CRTC 98-2, 5 March 1998. This lower ROE was based primarily on a lower forecast risk-free rate and a lower equity risk premium. However, CACAlta did not provide any technical evidence to support its ROE recommendation and failed to address any inverse relationship between the lower forecast risk-free rate and market risk premiums.
15. In addition, CACAlta’s submissions regarding several other issues did not contribute to a better understanding by the Commission. These include, for example, CACAlta’s submissions on the following issues: TCEI’s forecast for its Cost of Revenues (including Uncollectibles) and Miscellaneous Revenues; and the calculation of the initial value of the shareholder entitlement (which had been clearly set out in the Directive).
16. Conversely, in other areas, the Commission notes that CACAlta did contribute to a better understanding of certain issues such as integrality of directory operations, expense productivity and certain other issues related to shareholder entitlement. As well, CACAlta’s submissions regarding TCEI’s use of two contradictory inflation rates in its evidence also contributed to a better understanding of the issues by the Commission and resulted in an adjustment to TCEI’s contribution requirement.
17. Pursuant to subparagraph 44(5)(a) of the Rules, it is open to the Commission to award proportional costs, that is, a fraction or percentage of the full award otherwise payable, to indicate that an intervener’s performance was not wholly satisfactory. In this case, the Commission finds that while CACAlta did contribute to a better understanding by the Commission with respect to certain issues, it did not on other issues (as set out above). Accordingly, an award of costs is warranted, but in the circumstances, the amount awarded will be reduced by 25% in recognition of the deficiencies in certain areas of CACAlta’s submissions.
18. The application of CACAlta for an award of costs in respect of the above-mentioned proceeding is approved, on the following terms.
19. The Commission considers that CACAlta has not fully met the criteria set out in subsection 44(1) of the Rules. In particular, the Commission is unable to conclude that all aspects of CACAlta’s intervention contributed to a better understanding of the issues by the Commission.
20. In the circumstances, CACAlta is awarded 75% of its costs.
21. Costs awarded herein shall be payable by TCEI.
22. Costs awarded herein shall be subject to taxation in accordance with the Rules, and shall be taxed by Margot Patterson.
23. CACAlta shall, within 30 days of the date of this Order, submit a Bill of Costs and an Affidavit of Disbursements directly to the Taxing Officer, serving a copy on TCEI.
24. TCEI may, within two weeks of receipt of these documents, file comments with respect to the costs claimed directly with the Taxing Officer, serving a copy on CACAlta.
25. CACAlta may, within two weeks of receiving the comments, file a reply directly with the Taxing Officer, serving a copy on TCEI.
26. Costs are payable forthwith upon issuance of the Taxation Order.
27. All documents to be filed or served by a specific date must be actually received, not merely sent, by that date.
28. In addition to hard copy filings, parties are encouraged to file electronic versions of their documents in accordance with the Commission’s Interim Telecom Guidelines for the Handling of Machine-Readable Files, dated 30 November 1995. Filings should be made to the attention of the designated taxation officer. The Commission’s Internet email address for electronically filed documents is
Secretary General
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