HomeMy WebLinkAbout11 - AT&T ProtestAgenda Item # 11
ACTION
To: Board of Directors
From: Robert Mescher
Date: June 08, 2015
Subject: Hold a Protest Hearing for AT&T Regarding Adopted Pole
Attachment Fees
1. WHY THIS MATTER IS BEFORE THE BOARD
This item involves holding a hearing to allow AT&T the opportunity to present its case
for protesting the District's adopted pole attachment fees.
2. HISTORY
The District has owned its 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 pole attachments with a fee of $1.25 per pole. Pacific
Telephone and Telegraph was eventually acquired by AT&T.
On October 8, 2011, AB 1027 was passed which added Sections 9510-9519 to the
California Public Utilities Code. AB 1027 requires local publicly owned utilities (POU)
to make appropriate space and capacity on their poles and support structures
available for use by third party 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 jointly owned poles.
The District joined the Northern California Joint Pole Association (N('JPA) in July
2012. NCJPA is anon -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 NCJPA 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. These costs are reconciled monthly by NCJPA and
payments are made to the appropriate member.
AT&T is also a member of NCJPA. 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.
On October 22, 2013, AT&T informed the District that "AT&T will not be pursuing this
agreement." AT&T stated that they would remain attached to the poles under existing
1937 Agreement,
On October 23, 2013, the District gave AT&T a one-year written notice of our intention
to terminate the 1937 Agreement on October 31, 2014.
In February 2014, the District met with AT&T to discuss the existing pole attachments.
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 to their legal department
and leadership for approval.
District Counsel continued to communicate with AT&T from late August through
October 2014.
On October 22, 2014, AT&T informed the District in writing that it was interested in
continuing leasing space pursuant to Section 9510 (AB 1027) and requested the
District to provide the annual fee the District intends to charge under section 9510 of
the California Public Utilities Code to provide the annual fee the District intends to
charge under Section 9510 of the California Public Utilities Code.
On October 29, 2014, the District reminded AT&T in writing that that the 1937
agreement would terminate on October 31, 2014 and requested information
concerning the number of attachments per pole that AT&T was interested in leasing.
On November 10, 2014, AT&T informed the District it wanted to continue to lease
AT&T's attachments to the District -owned poles based on the District's records and
requested the District to calculate the annual fee for those attachments.
The District followed the requirements set by AB 1027 to calculate an amount for the
annual fee per foot of pole attachment and ensured compliance with AB 1027.
Presented at the January 21, 2015 Board meeting.
On February 9, 20151 AT&T identified a needed change to the annual pole attachment
fee calculation for administrative costs element.
Staff reviewed its calculation, compared it to other pole attachment calculations of
other utilities, and concluded that four modifications to the calculation were necessary:
1. Administrative Element
2. Net Pole Investment
3. Cost of Borrowing
4. Required Rate of Return
On May 17, 2015 the Board approved Resolution 2015-03 which established:
1. An annual fee per foot of pole attachment of $19;
2. A one-time fee to process a request for new attachments based on actual costs
of $110 per pole attachment; and
3. A penalty for attachments, reasonably shown to have been unauthorized and
are discovered on or after January 2012, of three times the annual attachment
fee plus the one-time processing fee of $110 per pole attachment.
This fee is comparable to other utilities' pole attachment fees:
$18 Sacramento Municipal Utility District
$18 Los Angeles Department of Water and Power
$19 City of Pasadena Water and Power
$19 City Azusa Light and Power
$19 City of Colton
$22 Riverside Public Utilities
3. NEW INFORMATION
On April 15, 2015, AT&T sent a letter (Attachment 1) protesting the adopted pole
attachment fees and requesting copies of District records. The District responded to
AT&T's request for records and also their subsequent requests.
On May 20, 2015, the Board held in abeyance the adopted pole attachment fees and
set June 8, 2015 (tonight) as the protest hearing date to allow AT&T the opportunity to
present its case for protesting the attachment fees.
On June 4, 2015, the District received a proposed fee calculation from AT&T totaling
$3.79 per foot of pole attachment and related documents supporting their case.
(Attachment 2)
On June 5, 2015, District Staff completed its review of AT&T's calculation and agrees
with the method of calculation, but disagrees with the following three values used in
the calculation:
• Number of POles - AT&T used 5,442 poles as obtained from the District's
GIS reports. However, the accounting asset records list 3,386 poles
(Attachment 3). Since AT&T is using the pole investment cost from the
accounting records, the pole count from the accounting records should also
be used. Staff recommends using a pole count of 3,386 which increases the
attachment fee by approximately $3.43.
• Contributed Capital Adjustment - AT&T estimated that the net investment
in poles and other overhead services should be adjusted downward
$4,280,498 due to capital contributions from 2001 through 2013. However,
the District adopted Resolution 9503 (Attachment 4) in 1995 to require
underground services for new construction. Therefore, no poles and overhead
services were dedicated from new developments after that date. Staff
recommends eliminating the the capital contribution adjustment from the net
pole investment and the maintenance elements which increases the
attachment fees by approximately $4.70.
• Required Rate of Return - AT&T used an estimated 8.00% Required Rate of
Return as compared to the District's 14.00% used in the adopted rate
calculation. As a compromise, staff recommends the FCC default rate of
11.25% which increases the attachment fees by approximately $0.60.
The amended pole attachment fee would be $12.52 per foot of pole attachment after
implementing the above modifications (Attachment 5).
No other amendment to Resolution 2015-03 regarding pole attachment fees and
charges are recommended at this time.
4. FISCAL IMPACT
The annual pole attachment revenue using a fee of $12.52 would be about $70,000.
5. RECOMMENDATION
Adopt ammended Resolution 2015-03 (Attachment 6) to reflect the changes in the
pole attachment fee from $19.00 to $12.52 per foot of pole attachment.
Robert Mescher Michael D. Holley
Administrative Services Manager General Manager