TSTCI Accounting, Marketing & Customer Service Conference Legislative & Regulatory Update Texas Universal Service Fund & More A brief history and look to the future. Weldon R. Gray, CPA, CEO July 12-14, 2017
Regulatory Update
Regulatory Update Five Year Plan filing requirement waiver - Project 47269 PUC conditionally approved waiver request
Regulatory Update Project 47269
Regulatory Update Project 47269
Regulatory Update Life Line Discounts PUC Sub. Rule 26.412 Solix changed a process for the April end-of-month process, per direction from the PUCT
Regulatory Update -- Life Line Note some additional details as it relates to the 2016 Modernization Order: The state of Texas is not supporting broadband accounts. If you see customers with the F indicator, it means they qualify for the federal discount only. Discount Type Indicator S State only B Both State and Federal F Federal only
Regulatory Update -- Life Line How the customers qualify now has an impact on their discount. If they qualify on one of the federal programs in the Order (SNAP, Medicaid, SSI, FPHA, Chip), then they are entitled to both the state and federal discounts (assuming voice-only service). If they qualify based on LIHEAP, TANF, or NSLP, they are entitled to the state discount only. And if they qualify for Veterans Pension Benefits or Survivors Benefits, they are entitled to the federal discount only. On the income side, if they qualify at or below 135% of the federal poverty guidelines, they are entitled to both state and federal discounts. If they qualify between 136 and 150%, they are entitled to the state discount only
Regulatory Update -- Life Line PURA Section 55.015 (d-1) specifies income level and social programs providing support to customers qualifying the customer for Life Line discounts Change will require Legislative action. A rule change alone to Sub. Rule 26.412 to once again mirror the Federal Life Line guidelines is not an option. You must update your processes and systems to properly apply Life Line discounts based on the S, B or F indicators provided by Solix.
Any Questions?
Legislative Update -------- Better News!
Making Telecom Sausage: A Legislative Update
Legislation This Session Total of 10,647 pieces of legislation filed. 4,333 House Bills - Only 700 Passed (16% ) 138 House Concurrent Resolutions Only 68 Passed 111 House Joint Resolutions Only 3 Passed 2,707 House Resolutions 2,682 Passed 2,298 Senate Bills Only 511 Passed(22% incl. SB 586) 64 Senate Concurrent Resolutions Only 29 Passed 58 Senate Joint Resolutions Only 6 Passed 938 Senate Resolutions 936 Passed
Legislation This Session Governor Signed 1,091 Bills Allowed to become law without signature 166 50 bills vetoed
Evolution of Texas Rural Support Mechanisms From the 1950s to the Future..
Evolution of Texas Rural Support Mechanisms Prior to 1950 and continuing until the mid 1970s Average Message Settlement Methodology Implicit, embedded in higher long-distance rates. Flowed from Bell/ATT. Based on number of long distance calls made or received. Mid-1970s until Mid-1980s Cost Separations Methodology Implicit, embedded in higher long distance rates. Still flowed from SBC or ATT. Based on individual amounts invested in facilities and for the associated expense of operations and maintenance.
Evolution of Texas Rural Support Mechanisms Mid-1980s until 2000 TECA Pooling Still Implicit, embedded in higher long-distance rates. Pool operated using investment, expense, and revenue data from Texas Intra-LATA jurisdictional operations. Support primarily flowed from SBC, and mid-sized companies fluctuated between payers and receivers. Still looked at facilities investment and operations and maintenance expense.
Evolution of Texas Rural Support Mechanisms TUSF - 2000 thru 2011 Developed during 1998-2000 time period Replaced TECA Toll Pool, reduced Intra-State Access rates and Intra-LATA toll rates. Revenue neutral change at implementation. Access-Line Based amount. Implemented in Docket 18516 for small companies. Explicit Support funded through TUSF surcharge.
Little did we know Per-line didn t work out so well and TSTCI took action.
Evolution of Texas Rural Support Mechanisms 2011 2017 CPI Adjusted Support Methodology HB 2603(2011) continued by SB 583(2013) CPI adjusted support based on the transition from the TECA pool to TUSF. Eliminated per-line support for a flat annual support amount paid over monthly installments. Still under the TUSF umbrella funded by the TUSF surcharge. While better, not permanent, and not based on a reasonable return.
With the CPI Adjustments set to expire, we faced a little bit of a problem.
The Small Company Industry Took Action! TSTCI and TTA combined resources and personnel in a team effort to effect change. SB 586 signed - will go into effect on September 1, 2017
2017 --- SB 586 Authored by Senator Perry in the Senate. Co-Authors: Buckingham, Estes, Hughes, Kolkhorst, Lucio, Nichols, Schwertner, Uresti Sponsored by Representative Geren in the House. Co-Sponsors: Springer, Bailes, Fallon, Paddie Finally passed on May 16, 2017 and was sent to the Governor on May 18, 2017. SIGNED on June 15, 2017 One day earlier and last day to act would have been May 29, 2017
Key Provisions of SB 586 Maintained as Proposed by Small Companies Automatic Continuation of Current Level of Support Until Implementation (Cliff is avoided) Flat Annual Support Amounts (Does not revert to per-line) Creates a reasonable rate-of-return range where support would remain unchanged. Instructs the PUC to create an adjustment mechanism that would bring companies within this range without a full blown rate case. No presumption of unreasonableness for those above the range. 56.025 Preserved. While not included in SB 586, a HUGE win to protect
Key Changes that Were Made to Proposal to Allow Passage of SB 586 Reasonable range is asymmetrical. The range is 3 percentage points below and 2 percentage points above the ROR. The defined ROR which is the fulcrum is no higher than 9.75% until 2021 then follows the FCC number (higher or lower). A provider is limited in any one support adjustment to no more than 140% of the support they received in the prior 12 month period. 2023 Sunset with Study prior to expiration.
What s Next
PUC Rulemaking Rulemaking to Implement SB 586 will start no later than January 1, 2018. Issues to be resolved in rulemaking. What will the annual filing look like. EMR+ How will commission determine reasonableness of costs and expenses? What will be the requirements and procedures for adjustment proceedings. Adjustments must be based off of a 3 year look. Proceedings must be eligible for administrative review or informal disposition. What would constitute good cause to file sooner than 3 years?
Sunset and TUSF Study These provisions set to expire in 2023 which lines up with PUC Sunset. A specific study will be done as to the effectiveness of this mechanism in 2022. Study is worded for PUC to make recommendations as to continue, amend or replace this mechanism.
I m Confused.. Talk to Me in Dollars and Cents.
Earnings Monitoring Report Data - 2015 Data from 42 Companies used to support legislation Financial impact without legislation ($23 MM Loss) SB 586 19 companies under floor rate of 6.75% 10 companies in the slot 6.75% to 11.75% 13 companies over the ceiling 11.75% Financial impact with SB 586 conservative estimate increase of $8MM instead of loss of $23MM
Earnings Monitoring Report Data - 2015 SB 586 Limit of increase 140% of prior year support 19 companies under floor rate of 6.75% 19 companies under by $20 MM 9 companies eligible for additional support to bring up to 6.75% 10 companies limited to 140% of prior year support Impact of limit approx. 12 MM BUT Only a Delay
Earnings Monitoring Report Data - 2015 SB 586 13 companies over the ceiling 11.75% Remember, based on 2015 EMR data Some members with the larger amounts see financial changes by 2017 no longer over. All members manage investments, revenues, and expenses to target authorized Rate of Return
PUC Rulemaking Earnings Monitoring PLUS We know PUC staff is interested in: Executive Compensation Affiliate Transactions Additional underlying data supporting the Earnings Monitoring Report Local Rates FCC Benchmark ACAM vs. Legacy State targets Work is beginning on concepts for the Rulemaking Will soon involve TSTCI Committees Accounting & Regulatory We need your feedback What information/data are you comfortable providing? What information/data would you fight to avoid providing?
Other Key Legislation Passes Affecting Some Member Affiliates!!!
Other Key Legislation Passes Affecting Some Member Affiliates!!! SB 1476 SIGNED June 15, 2017 Previously. CLEC support in exchanges where ATT and Verizon(Now Frontier) were going to zero would go to zero after December 31, 2017. Now Support will continue until December 31, 2023 with some caveats. Should access lines in those exchanges decrease to less than 50% of the 2016 level, the commission could review and reduce support.
Other bills of Interest SB 1003 (Signed 5/18/17 Effective 9/1/17) participation of dereg. telecom co.s in the lifeline program SB 1004 (Signed 6/09/17 Effective 9/1/17) network nodes in public rights-of-way SB 1976 (Signed 5/19/17 Effective 9/1/17) eligibility process for customer service benefits - programs provided by certificated telecommunications utilities for low-income customers
Other Interesting bills HB 2027 - Strike a law from the 1940 s regulating the selling of secondhand watches. Circa 1967 - Governor signed 05/28 HCR 49 - Designating July as Train Safety Awareness Month for 10 years beginning 2017. Sent to Governor not yet signed HCR 56 - Recognizing Texas as a Purple Heart State. Governor signed 05/29 30 Purple Heart cities, 4 Purple Heart counties, and 9 Purple Heart universities Texas is home to Belton New Tech High, the first high school in the nation to earn a Purple Heart School designation, and to Purple Heart Elementary School in El Paso
Other Interesting bills that did not make it to the Governor HCR 92 - Designating the breakfast taco as the official state breakfast item of the state of Texas. Still un-officially good! SCR 16 - Encouraging the President of the United States to refrain from threatening elected officials. HCR 32 - Designating the Bowie knife as the official State Knife of Texas. Remember the Alamo! HB 166 - Prohibits corporal punishment as a method of student discipline. So, it is still legal.. HJR 95 - Proposing a constitutional amendment relating to the right to own, hold & use any mutually agreed upon medium of exchange. Print your own money???
Governor Calls Special Session The Governor has called a Special Session for July 18th. The initial Call will be for continuation of the Texas Medical Board and sunset legislation to keep several other state agencies alive. After that bill passes the Senate, there are 19 additional items added to the call.
Governor Calls Special Session A teacher pay raise of $1,000 Giving school administrators flexibility in teacher hiring and retention School finance reform School choice for special-needs students Property tax reform and rollback elections for increases
Governor Calls Special Session Caps on state and local spending based on growth of population and inflation Preventing cities from regulating what property owners do with trees on private land Preventing local governments from changing rules midway through construction projects Speeding up local government permitting processes Municipal annexation reform
Governor Calls Special Session Preventing local entities from passing their own texting-while-driving bans Restrictions on school bathroom use for transgender students Prohibiting the use of taxpayer dollars to collect union dues Prohibiting the use of taxpayer funding to subsidize health providers that also perform abortion Requiring women to get separate insurance policies to cover non-emergency abortions
Governor Calls Special Session Increasing existing reporting requirements when complications arise during abortions Strengthening patient protections relating to donot-resuscitate orders Cracking down on mail-in ballot fraud Extending the state's maternal mortality task force
Legislative Information Resources on the Web www.capitol.state.tx.us Legislation Information Bill numbers, bill text, and actions by date
Any Questions??? If not, then it s legislative Sausage!!!