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HomeMy WebLinkAbout12-Discussion of Establishing an Annual Fee for Pole AttachmentsAgenda Item #12 To: From: Date: Subject: Board of Directors Stephen Hollabaugh January 21, 2015 Discussion of Establishing an Annual Fee for Pole Attachments WORKSHOP 1. WHY THIS MATTER IS BEFORE THE BOARD Board action will be required to establish an annual fee per foot of pole attachment. This fee will be used in the agreement to provide appropriate space and capacity on and in the utility poles available for use by communication service providers in a non- discrimination basis and complies with the California Law (AB 1027). 2. HISTORY The District has owned our electric utility poles since the beginning of the District (1927). In 1937, the District entered into an agreement with Pacific Telephone and Telegraph Company for the attachment to poles. Pacific Telephone and Telegraph eventually became AT&T. In late 2011, AB 1027 was passed. That requires local publicly owned utilities (POU) to make appropriate space and capacity on their poles and support structures available for use by communication service providers. The bill specified that it does not apply to pole attachment contracts entered into prior to January 1, 2012. The bill also specified that its provisions do not apply to a jointly owned pole. The District joined the NCJPA (Northern California Joint Pole Association) in July 2012. NCJPA is a non-profit organization comprised of various Investor Owned, Municipal and Public Entities that provide Electric, Telephone, Cable and Wireless services. Each member holds joint equity in utility poles within their respective service territories around Northern California. Members of the Association make a joint undertaking to share expenses regarding ownership, maintenance, replacement, removal and disposal of jointly owned poles and appurtenances (mainly anchors). Liability of the structures is also shared. The main function of NCJPA is to calculate the values of each transaction based on costs agreed upon by all members. These costs are reconciled monthly by NCJPA and payments are made to the appropriate member. AT&T is a NCJPA member. Therefore, all joint pole transactions, ownership and expenses within our District shall be shared with AT&T. In order for AT&T to acquire its equity portion of ownership in poles within the District, AT&T needs to reimburse the District for that equity portion. Since joining the NCJPA, any new poles installed, or replaced, followed the NCJPA processes. Starting in late 2012, the District worked cooperatively with AT&T to prepare a “Purchase and Sales Agreement” for the partial interest in the District’s existing utility poles. AT&T drafted most of the agreement with input from District staff. The District and AT&T worked to gather the data required on the existing poles and the Purchase and Sales Agreement was finalized. This was completed by April of 2013. On July 17, 2013, the District’s Board approved this agreement with the understanding that AT&T would soon after, sign the agreement. AT&T continued to try to get authorization for the agreement over the next three months. 3. NEW INFORMATION On October 22, 2013, AT&T informed the District that “AT&T will not be pursuing this agreement. AT&T stated that they will remain attached to the poles under existing agreements (Existing 1937 Agreement).” On October 23, 2013, the District gave AT&T a one year written notice of its intention to terminate the 1937 agreement on October 31, 2014. In February 2014, the District met with AT&T to discuss these existing poles. AT&T verbally agreed that it would sign an agreement to purchase the partial interest in the poles and we should update the cost with the new 2014 NCJPA data. District staff again worked with AT&T to update the agreement. By the middle of June 2014, the agreement was finalized and AT&T sent the agreement up to their legal department and AT&T leadership for approval. TDPUD counsel was in touch with AT&T from late August through October 2014. On October 22, 2014, AT&T informed the District in writing it was interested to continue to lease space pursuant to Section 9510 (AB 1027) and requested the District to provide the annual rate the District intends to charge under section 9510 of the Public Utilities Cost. On October 29, 2014, the District informed AT&T in writing that that the 1937 agreement will terminate on October 31, 2014 and requested information concerning the number of attachments per pole that AT&T was interested in. On November 10, 2014, AT&T informed the District it wanted to continue to attach to District poles and requested a rate for these attachments. On December 18, 2014, the District informed AT&T that pursuant to and in compliance with PUC Section 9512, the District calculated the annual fee per attachment, not per pole, to be $28.84. The District has followed the requirements set by AB 1027 to calculate a rate for the annual fee per attachment and ensure compliance with AB 1027 and includes: Providing appropriate space and capacity on and in its utility poles and support structures available for use by a communication provider; Requiring that the TDPUD Board determine the annual pole attachment fee pursuant to the formula specified in this bill; Ensures that a POU’s annual pole attachment fee shall not exceed an annual amount determined by multiplying the percentage of the total usable space that would be occupied by the attachment by the annual cost of ownership of the pole and its supporting anchor, with a rebuttal presumption that a single attachment occupies one foot of usable space and an average pole contains 13.5 feet of usable space; and Establishes a one-time fee to process a request for attachment based on actual costs and a one-time fee for a rearrangement requested by a cable company and to impose a penalty for unlawful attachment. The pole attachment formula is: Maximum Rate Space Occupied Net Pole Investment 0.85 Annual Per pole = Usable Space x Total Number of Poles x x Op. Cost Rate Maximum Rate 1 $2,275,910.83 0.85 1.10 Per ft. of pole = 13.5 x 5,442 x x Maximum Rate Per ft. of pole = $28.84 The data making up the formula come from the District’s audited FY 2013 financial statements. The details making up the formula are” Space Occupied in feet”,”Usable Space in feet”, “Net Pole Investment”, “Annual Operating Costs”, “Taxes”, and “Return”. This data is: Space Occupied ft. = 1 Usable Space ft. =13.5 Net Pole Investment $2,275,910.83 Account 364 = $3,147,028.53 Account 108 Depr.= $871,117.70 Accum Def. Income Tax = $0.00 Total Number of Poles 5,442 from TDPUD GIS database An adjustment to a utility's net pole investment 0.85 (15% for electric utilities) is necessary to eliminate the investment in crossarms and other non-pole related items. Annual Operation Costs 1.10 Administrative Element 1.03 Total General and Admin. From 12/31/13 Fin. Report $2,339,168.56 Gross Plant (Acct 364) $3,147,028.53 Accumulated Deprec. (Acct 108) $871,117.70 Accumulated Deferred Taxes - Maintenance Element 0.03 Account 593 From 12/31/13 Financial Report $209,979.85 Account 364 Poles $3,147,028.53 Account 365 OH Conductors & Devices $6,773,309.78 Account 369 Services $2,075,367.09 Accumulated Depreciation of Account 364 $871,117.70 asset mgmt gl account & asset Accumulated Depreciation of Account 365 $2,360,216.22 Accumulated Depreciation of Account 369 $667,108.54 Accumulated Deferred Income Tax $0.00 Depreciation Element 0.04 Gross Pole Investment (Account 364) $3,147,028.53 Net Pole Investment (Account 364-Account 108) $2,275,910.83 Depreciation Rate for Gross Pole Inventory * 3% * 33 Year Life from Accounting Taxes 0.0 Return 0.0 One-Time Fee to Process a Request for Attachment The District can charge a one-time fee to process a request for attachment based on actual costs and a one-time fee for a rearrangement requested by a cable company. All applications will be handled by Electric Engineering. An Electric Engineer and or Electric Superintendent will do the approvals, field work, load calculations, post- construction inspections and all other related duties. A contract administrator will process the paper work, ie research ownership and records, edit the database, prepare memos to accounting, GIS, and other clerical duties. It is estimated that each pole and its application will take approximately 1 hour to perform the above duties. The engineering portion will be 70% and the clerical will be 30%. Billable hours include all of the standard overheads charged to regular work orders. Hourly Rate 18% OH 70% = Application Fee/Pole/Attachment Electric Engineer ($57.16 + 67.45 )X .70 = $87.23 Contract Admin. (35.30 + 41.65 )X .30 = $23.08 $110.31 Given the calculation above, the District is proposing an application fee of $110 per pole to process a request for single attachment. Stephen Hollabaugh Michael D. Holley Assistant General Manager General Manager 4. FISCAL IMPACT There in no fiscal impact for this workshop. 5. RECOMMENDATION This is a workshop item and information is provided for Board review and comment. Next Steps AB 1027 required a minimum of 30 days after a workshop for a POU to have an action to approve a rate via resolution and a minimum of 60 days after the Board approves the rate for the rate to become effective. March 18, 2015 Board meeting, Propose a resolution to approve a rate for pole attachments June 1, 2015, Date the rate will become effective. The existing agreement with Suddenlink is a 15 year agreement and will not end until 2018. Suddenlink's current attachment fee will not be addressed until the existing contract expires.