Section 69.501. Average schedule telephone companies; residual ratemaking—statement of policy

(a) Background. In lieu of employing the FCC Part 36 cost allocation manual to develop interstate revenues, expenses and investment, an average schedule telephone company uses generalized industry data to estimate its interstate costs. For intrastate ratemaking purposes, the residual ratemaking methodology assumes that the intrastate revenue requirement is equal to the company’s total revenue requirement less revenues deemed by the average schedule to be interstate.

(b) Treatment of costs. To determine the intrastate cost of service for average schedule telephone companies and their intrastate results of operations and return, the costs reimbursed pursuant to the National Exchange Carrier Association (NECA) average schedule tariff should be deducted from each company’s total body of costs. This would be the appropriate way to assure consistency betweenthe state/interstate cost allocation factors implicit in the use of average schedule tariffs and the state/interstate cost allocation factors based on the FCC’s Part 36 cost allocation manual.

(c) Policy. For average schedule telephone companies, the Commission’s current ratemaking policy and practice for financial reporting purposes will be based upon use of the residual ratemaking method. Whether or not this method will be used to set intrastate rates for any individual average schedule telephone company will be determined only after notice and opportunity to be heard in accordance with law.

The provisions of this § 69.501 adopted December 31, 1993, effective January 1, 1994, 24 Pa.B. 16.