4 CCR 723-27
RULE (4 CCR) 723-27-1. APPLICABILITY AND PURPOSE FOR RULES. 723-27-1.1 These rules are applicable to all intrastate telecommunications service providers who provide both regulated and deregulated telecommunications services as permitted by law. Except as otherwise specifically provided, Rules 15 through 20 are applicable only to local exchange providers as defined in § 40-15-102(24.5), C.R.S., and who have opted to have their access charges regulated by the Commission in accordance with Part 2 of Article 15, Title 40, C.R.S. as stated in § 40-15-105(2), C.R.S. (hereafter referred to in these rules as “Rural Telecommunications Providers”). 723-27-1.2 Rules 1 through 14 are designed to implement Article 15 of Title 40, Colorado Revised Statutes (1989 Supp.). The rules prescribe cost-allocation methodologies for the segregation of intrastate investments and expenses for telecommunications service providers that offer both regulated and deregulated telecommunications services are not subsidized by regulated telecommunications services. The rules prescribe methodologies that will prevent the price of deregulated services being set below cost by use of subsidization from customers of regulated services. 723-27-1.3 The basis for this amendment to these rules is newly enacted § 40-15-203.5 C.R.S., (1993) requiring a review of existing rules thereby implementing simplified regulatory treatment for small local exchange carriers.
723-27-1.4 The Competitive Local Exchange Carriers (CLECs) are exempt from Rules 4.1, 6.1 through 6.5, Rules 7.2 through 7.6, and, under certain circumstances, Rule 5.1. (4 CCR) 723-27-PART 1 RULES UNDER § 40-15-108, C.R.S. PRESCRIBING COST-ALLOCATION METHODS FOR SEGREGATION OF INVESTMENTS AND EXPENSES OF TELECOMMUNICATIONS PROVIDERS RULE (4 CCR) 723-27-2. DEFINITIONS.
As used in this rule, unless the context otherwise requires: 723-27-2.1 Service means both product and service.
723-27-2.4 Commission means the Colorado Public Utilities Commission. 723-27-2.5 Telecommunications service is defined in § 40-15-102(29), C.R.S. 723-27-2.6 Regulated telecommunications services are defined in § 40-15-102(24), C.R.S. 723-27-2.7 Deregulated telecommunications services are defined in § 40-15-102(6), C.R.S. 723-27-2.8 Interexchange provider is defined in § 40-15-102(11), C.R.S. 723-27-2.9 Competitive Local Exchange Carrier (“CLEC”) means a telecommunications provider that applied for and received a certificate of public convenience and necessity - to provide local exchange services in the State of Colorado after February 8, 1996, pursuant to Rules Regulating the Authority to Offer Local Exchange Telecommunications Service, 4 CCR 723-35, and § 40-15- 503 (2) (f), C.R.S.
RULE (4 CCR) 723-27-3. APPLICABILITY TO SPECIFIC TYPES OF SERVICES. 723-27-3.1 Each provider must file with the Commission, a list of each service that it offers, providing a description of each, service and the classification of each service as a regulated or deregulated telecommunications service as those terms are used in Title 40, Article 15, C.R.S., and as determined by the Commission. This list shall be updated as changes occur. 723-27-3.2 Providers will be permitted to continue accounting for nontariffed services as regulated services when they are offered incidental to tariffed services provided that: 723-27-3.2.1 The services are outgrowths of regulated operations; and 723-27-3.2.2 The total revenue from all those services does not exceed: 723-27-3.2.2.1 For all providers, except Rural Telecommunications Providers, one percent of the provider's total annual Colorado operating revenue for regulated services; seven percent of the Rural Telecommunications Provider's total annual Colorado operating revenue for regulated services; or 723-27-3.2.2.2 The provider-specific revenue levels as ordered by the Commission; and 723-27-3.2.3 The service is a non-line-of-business service; and 723-27-3.2.4 The service has traditionally been treated as an incidental service. 723-27-3.3 Providers will be permitted to continue a accounting for deregulated de minimis services, which have traditionally been offered in conjunction with tariffed services, as regulated services provided that:
723-27-4.3 Providers who are already authorized by this Commission prior to April 30, 1990, to maintain their books of account and records in a manner other than the USOA need not seek a waiver from Rule 4.1 and are authorized to continue maintaining their books of account and records in the manner previously authorized by this Commission.
723-27-4.4 CLECs are automatically exempt from Rule 4.1 pursuant to 4 CCR 723-1-25(c)(1). However, a CLEC must implement a suitable alternate method of producing Colorado intrastate-specific information to the Commission.
RULE (4 CCR) 723-27-5 SEPARATION OF COSTS BETWEEN THE STATE AND INTERSTATE JURISDICTIONS.
723-27-5.1 Any provider which provides facilities or equipment for use by users or providers of interstate telecommunications services must apply federal cost allocation and separations principles as described in Part 64 (The Cost Allocation Manual) and Part 36 (The Separations Manual). 723-27-5.2 A provider, other than a CLEC, which is not required by the FCC to apply the Part 36 rules may apply for a waiver of Rule 5.1 as it relates to Part 36. However, the provider requesting that waiver must implement a suitable alternate method of producing Colorado intrastate-specific information to the Commission.
723-27-5.3 If a CLEC has been given an exemption by the FCC from either Part 64 or Part 36, it is automatically exempt from that portion of Rule 5.1 as well. However, the CLEC must implement a suitable alternate method of producing Colorado intrastate-specific information to the Commission. RULE (4 CCR) 723-27-6. COST-SEGREGATION STANDARDS - GENERAL. For purposes of these rules, and in order to comply with § 40-15-106, C.R.S., concerning improper cross- subsidization and illegal restraint of trade, and § 40-15-108(2), C.R.S., concerning segregation of intrastate investments and expenses in accordance with cost-allocation methodologies prescribed by this Commission to ensure that deregulated telecommunications services are not subsidized by regulated telecommunications services when a provider offers both regulated telecommunications services and deregulated telecommunications services:
723-27-6.2.3 Variability - Costs that are not directly traceable to a particular service, but do vary in total with some measure of the volume of activity that is associated with services, are segregated according to the estimated rate of variability. 723-2.7-6.2.4 Capacity Required - Costs of capacity are assigned according to whether they are necessary for the performance of the service.
723-27-6.2.5 Beneficiality - A service benefits from a cost if that cost is necessary to render that service.
723-27-6.3 Any investments or expenses that are used jointly by two or more different services or that are used in common by services must be segregated among all of those services using allocators that, to the maximum extent practicable, track how those costs are incurred. 723-27-6.4 Consistent with FCC Docket 86-111, Report and Order adopted December 23, 1986, ¶ 131, these rules do not require or suggest the sole use of Cost Accounting Standards Board (CASB) standards.
723-27-6.5 The method for segregating investments and associated expenses which are common or jointly used must ensure that all services that use those investments and expenses are allocated a portion of the joint investments and expenses. Incremental of marginal cost studies will not be accepted for the purposes of this rule. RULE (4 CCR) 723-27-7. COST-SEGREGATION STANDARDS AND GUIDELINES - SPECIFIC. 723-27-7.1 All investments and expenses attributable to the interstate jurisdiction are to be allocated using applicable federal rules. Each provider must be able to demonstrate that these federal procedures have been properly applied.
723-27-7.2 Each service must be treated specifically in the cost-segregation procedure. There shall be a description of each service provided by the provider, which identifies the service, the service family, and which describes how the service or service family is furnished in order to provide sufficient information about the service to determine the appropriate cost categories to be employed unless it qualifies for treatment as an incidental service Under Rule 3.2 or a de minimis service under Rule 3.3. 723-27-7.3 In order to provide a consistent approach to segregating all costs, the Commission requires the following factors be applied (Listed in descending order of preferred application): 723-27-7.3.1 Costs must be directly assigned whenever possible. Directly assignable costs are defined as those costs that can be attributed only to a specific service. (This employs the Traceability principle in Rule 6.2.2.) Where more than one service uses an investment or causes a cost to be incurred, direct assignment is inappropriate. 723-27-7.3.2 The method of segregating common or jointly used investments and expenses must use the provider's own engineering and service-provision design criteria as the primary assumption. (This employs the Variability principle in Rule 6.2.3.) The segregation method employed must, to the maximum extent possible, follow the. design, criteria, including but not limited to the following:
723-27-7.3.3 Common or joint costs that do not vary in direct proportion to the relevant amounts of use of the service shall be segregated by a surrogate measure that has a logical or observable correlation to the use of the service; (This employs the Capacity Required principle in Rule 6.2.4.) except a time-reporting method of allocation shall be used for certain labor-intensive items as required in Rule 7.3.4.
723-27-7.3.4 A time-reporting method of allocation shall be used for labor-intensive customer operations, or service related expenses or investments or significance. The allocation of costs associated with joint marketing of services, operator services, Services (USDA Account Number 6610), local business office, and planning shall employ actual time-reporting methods for the allocation, if not directly assigned.
723-27-7.3.4.2 A method different from a strict time-reporting allocation method may be approved by the Commission if it can be verified that the surrogate method is reasonably related to the expense being allocated.
723-27-7.3.5 Residual common marketing expenses which cannot be directly assigned, or directly or indirectly attributed, will be allocated using a general marketing allocator. This allocator will be derived from the previously assigned or attributed marketing expenses between regulated and deregulated operations.
723-27-7.3.6 Common costs for which there is not direct or indirect measure of allocation shall be segregated using an appropriate general allocator that is based upon total expenses otherwise assigned. (This employs the Beneficiality principle in Rule 6.2.5.) 723-27-7.4 General allocators shall be used only in exceptional cases and, then, only when the justification for their use is explained fully.
723-27-7.5 Providers will be required to provide the Commission with all the data necessary to verify the cost segregation.
723-27-7.6 As providers develop new services, it is not appropriate to allocate investments or expenses associated with the new services exclusively to existing services. As new services begin to use joint and common investments and expenses are incurred, the methods of segregation must be modified to track the usage and expenses.
RULE (4 CCR) 723-27-8. IMPLEMENTATION AND ENFORCEMENT.
723-27-8.1 A certified audit report shall be filed with the Commission when a provider files a general rate case which is defined to ordinarily include requests for a change in revenue requirements, a change in the spread of rates, a change in rate base, and a change in the rate of return. 723-27-8.2 A provider seeking any change in revenue requirements shall have the burden of demonstrating that the change is based on cost information and standards established in these rules. RULE (4 CCR) 723-27-9. INFORMATION REQUIREMENTS.
Each provider shall provide the following information:
723-27-9.3 A list of all services which the provider now accords incidental accounting treatment and treats as incidental services and the justification for treating each as incidental. 723-27-9.4 A list of all services which the provider accords de minimis accounting treatment and treats as de minimis services and the justification for treating each as de minimis. 723-27-9.5 If it is a local exchange provider, a chart showing all of its corporate affiliates. 723-27-9.6 If it is a local exchange provider, a statement identifying affiliates that engage in transactions with the providing entity, as described in Rule 13, describing the nature, terms and frequency of those transactions.
RULE (4 CCR) 723-27-10. REPORTING AND RECORDKEEPING - APPENDIX B TO ANNUAL REPORTS.
723-27-10.1 Each provider will be required to keep records and all supporting documentation for cost segregations for two years following the close of the fiscal year to which the records relate. 723-27-10.2 Each provider, except Rural Telecommunications Providers, shall file with the Commission its segregated financial statements as an Appendix B to its annual report. 723-27-10.3 Unless an Appendix B is used to support a general rate case as defined in Rule 8.1, the Appendix B need only be certified by a certified public accountant. If the Appendix B is also used by the provider to support a general rate case, then the Appendix B must be certified in accordance with Rules
11.1.1 through 11.1.5.
RULE (4 CCR) 723-27-11. AUDITING.
723-27-11.1 Certified auditor's reports required under Rule 8.1 of these rules shall include the following information:
723-27-11.1.2 The auditor's conclusion as to whether actual methods and procedures designed and implemented by the provider conform with the procedures described in these rules. 723-27-11.1.3 Any material exceptions or qualifications that the auditor may have identifying the adequacy of the procedures.
723-27-11.1.4 Any limitations in the scope of review imposed upon the auditor by the provider. 723-27-11.1.5 A statement that the attestation standards have been fully met during the examination.
723-27-11.2 Any workpapers used by independent auditors must be made available for Commission staff review. The provider shall authorize the release of these workpapers by the auditors to the Staff of the Commission.
RULE (4 CCR) 723-27-12. PROPRIETARY INFORMATION.
723-27-12.1 The certified auditor's report may be given proprietary status if requested. 723-27-12.2 The detailed specifications, documentation, and supporting information implementing these rules must be made available to the Commission and its staff and may be given proprietary status if requested.
723-27-12.3 Appendix B filed in accordance with Rule 10 of these rules may be given proprietary status if requested.
RULE (4 CCR) 723-27-13. AFFILIATE TRANSACTIONS - LOCAL EXCHANGE PROVIDERS. 723-27-13.1 Transactions with affiliates involving asset transfers or provision of services into or out of the regulated accounts shall be recorded by the provider in its regulated accounts as provided in Rules 13.2 through 13.5.
723-27-13.2 Transfer of Assets.
723-27-13.3.2 For all other services provided by a provider to its affiliate, the services shall be recorded at either fair market value or fully distributed cost, whichever is higher. For all other services received by a provider from its affiliate, the service shall be recorded at either fair market value or fully distributed cost, whichever is lower, except that services received by a provider from an affiliate which exists solely to provide services to members of the provider's corporate family shall be recorded at fully distributed cost. For purposes of this section providers are required to make a good faith determination of fair market value.
723-27-13.4 Prevailing Price Valuation. In order to qualify for prevailing price valuation, sales of a particular asset or service to third parties must encompass greater than 50 percent of the total quantity of such product or service sold by an entity. Providers shall apply this 50 percent threshold on a asset-by- asset and service-by-service basis, rather than on a product line or service line basis. In the case of transactions for assets and services subject to section 272 of the Communications Act of 1934, a Bell operating company may record such transactions at prevailing price regardless of whether the 50 percent threshold has been satisfied.
723-27-13.5 Income taxes shall be allocated among the regulated activities of the provider, its nonregulated divisions, and members of an affiliate group. Under circumstances in which income taxes are determined on a consolidated basis by the provider and other members of an affiliated group, the income tax expense to be recorded by the provider shall be the same as would result if determined for the provider separately for all time periods, except that the tax effect of carry-back and carry-forward operating losses, investment tax credits, or other tax credits generated by operations of the provider shall be recorded by the provider during the period in which applied in settlement of the taxes otherwise attributable to any member, or combination of members, of the affiliated group. 723-27-13.6 All providers, except Rural Telecommunications Providers and interexchange providers, must provide to the Commission a statement identifying affiliates that engage in transactions with the provider. They shall describe the nature, terms and frequency of those transactions. 723-27-13.6.1 Nature of Transactions. The provider must state, for each service transaction, a description of the nature of the transactions (that is, whether the service involves the provision of services or asset transfers).
RULE (4 CCR) 723-27-14. AFFILIATE TRANSACTIONS INTEREXCHANGE PROVIDERS. Notwithstanding any provisions to the contrary, interexchange providers shall file contemporaneously with this Commission any reports required to be filed by them with the FCC concerning affiliate transactions as required in 47 CFR 64.
4 CCR 723-27-PART 2 RULES PRESCRIBING THE STANDARD PROCEDURES FOR SEPARATING TELECOMMUNICATIONS PROPERTY COSTS, REVENUES, EXPENSES TAXES AND RESERVES FOR ACCESS CHARGES OF RURAL TELECOMMUNICATIONS PROVIDERS RULE (4 CCR) 723-27-15. APPLICABILITY.
Rule 18 is applicable to Rural Telecommunications Providers who are not average schedule companies as defined in 47 CFR 69.605 to 69.610, (average schedule small LEC) except as otherwise specifically noted. Rule 20 is applicable to all Rural Telecommunications Providers. RULE 4 CCR 723-27-16. [RESERVED FOR FUTURE USE.] RULE 4 CCR 723-27-17. [RESERVED FOR FUTURE USE.] RULE 4 CCR 723-27-18. COLORADO INTRASTATE ACCESS COSTS SHALL BE SEPARATED. 723-27-18.1 Pursuant to § 40-15-108(1) C.R.S., each Rural Telecommunications Provider which provides facilities or equipment for use by interstate users or providers of telecommunications services' shall separate all investments and expenses associated therewith according to applicable federal separation procedures and agreements. Prior to separating intrastate costs, each provider shall segregate its intrastate investments and expenses in accordance with Sections 1 through 14 of these Rules. 723-27-18.2 Colorado Intrastate Access Costs shall be separated from other jurisdictional costs using the separation procedures of 47 CFR 36, with the following exceptions: 723-27-18.2.1 COMMON LINE ALLOCATION. As provided in Rules 18.2.1.1 and 18.2.1.2, the lesser of 26.5 percent or twice the subscriber line usage (SLU) (as measured by the ratio of intrastate interexchange holding time minutes of use to total holding time minutes of use applicable to traffic originating and terminating in the study area, as defined in 47 CFR 36, shall be allocated to Colorado switched access and this allocation factor shall be known as the “basic allocation factor”.
723-27-18.2.2 LOCAL SWITCHING ALLOCATION. Except as provided in Rule 18.2.2.1, the allocation of Category 3 of Local Switching Equipment shall follow 47 CFR 36.125 using Colorado relative dial equipment minutes of use (DEM), (which are the minutes of holding time of the originating and terminating local switching equipment, as defined in 47 CFR 36) for InterLATA and IntraLATA switched access. The Colorado DEM factors shall be weighted by a factor of 1.5. 723-27-18.2.2.1 In no event shall the sum of all the interstate and the intrastate allocation factors be greater than 0.85. If the arithmetic sum exceeds 0.85, the Intrastate allocation factor(s) shall be reduced accordingly.
RULE 4 CCR 723-27-19. [RESERVED FOR FUTURE USE.] RULE 4 CCR 723-27-20. COLORADO INTRASTATE ACCESS CHARGE ELEMENTS. 723-27-20.1 The rate elements contained in the access tariffs of Rural Telecommunications Providers who are not average schedule Rural Telecommunications Providers, shall be based upon an application of 47 CFR, part 69.1 to 69.502, to the intrastate access revenue requirement of the Rural Telecommunications Provider.
723-27-20.2 The intrastate access charge elements in the tariffs of average schedule Rural Telecommunications Providers shall be set at the average as determined by the Administrator, of the access rate elements of the Rural Telecommunications Providers who are not average schedule LECs which exists at the time that the average schedule Rural Telecommunications Provider's tariff rate elements are established. Average schedule Rural Telecommunications Providers are not required to modify their access charge elements each time the administrator redetermines the average of the access charge elements, but each shall comply with the provisions of Rule 19.6.2. {Rule 18.6.1 of the Rules Prescribing the Procedures for Administering the Colorado High Cost Fund, 4 CCR 723-41}. When modified access charge elements are to be established, through request by the LEG, show cause, complaint or other proceeding, the access charge elements shall be set at the then-current average. 4 CCR 723-27-PART 3 WAIVERS FROM RULES AND INCORPORATION OF RULES OF THE FEDERAL COMMUNICATIONS COMMISSION BY REFERENCE RULE (4 CCR) 723-27-21. WAIVER FROM RULES.
The Commission may permit variance from these rules for good cause shown if it finds compliance to be impossible, impracticable, or unreasonable, if not otherwise contrary to law. RULE (4 CCR) 723-27-22. INCORPORATION BY REFERENCE.
References in these rules to Parts 32, 36, 64, and 69 and Federal Communications Commission CC Docket 86-111, are rules issued by the FCC and have been incorporated by reference in these rules. These rules may be found at 47 CFR Parts 32, 36, 64, and 69, revised as of October 1, 1995. References to Parts 32, 36, 64, and 69 do not include later amendments to or editions of those parts. A certified copy of these parts which have been incorporated by reference are maintained at the offices of the Colorado Public Utilities Commission, 1580 Logan Street, OL-2, Denver, Colorado 80203 and are available for inspection during normal business hours. Certified copies of the incorporated rules shall be provided at cost upon' request. The Director of the Public Utilities Commission, or his designee, will provide information regarding how the incorporated rules may be obtained or examined. These incorporated rules may be examined at any state publications depository library.