Administrative Code

Virginia Administrative Code
Title 20. Public Utilities and Telecommunications
Agency 5. State Corporation Commission
9/24/2020

Chapter 403. Rules Governing Small Investor-Owned Telephone Utilities

20VAC5-403-10. Applicability.

A. This chapter applies to any small investor-owned public utility (other than a cooperative) as defined by Chapter 19 (§ 56-531 et seq.) of Title 56 of the Code of Virginia. This company shall be referred to as a "small telephone company " or "applicant."

B. A small telephone company should perform its own tariff justification analysis in-house prior to changing rates, tolls, charges, fees, rules, or regulations, collectively referred to as "tariffs." As a part of its in-house tariff justification, a small telephone company should consider whether the tariff change is necessary and whether the change is dictated by the cost of providing the tariffed service. All tariff changes of a small telephone company must be "just and reasonable" as that standard is defined in § 56-235.2 of the Code of Virginia.

C. This chapter applies when any small telephone company subject to Chapter 19 (§ 56-531 et seq.) of Title 56 of the Code of Virginia changes any rate, toll, charge, fee, rule, or regulation applicable to any customer or customers and this change results in increased rates paid by that customer or customers. Changes not increasing customer rates may be done in the traditional manner without application of this chapter.

Statutory Authority

§ 12.1-13 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 18, Issue 4, eff. October 17, 2001.

20VAC5-403-20. Timing of filing of tariff changes.

A small telephone company shall file all changes in its tariffs with the Division of Communications of the State Corporation Commission at least 15 days in advance of the notice to the public required by 20VAC5-403-30.

Statutory Authority

§ 12.1-13 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 18, Issue 4, eff. October 17, 2001.

20VAC5-403-30. Notice.

A small telephone company shall complete notice to its customers 30 days prior to the effective date of changes in its tariffs. This notice shall at a minimum use the following format to the extent applicable:

NOTICE OF (INCREASES IN, CHANGES IN) RATES, TOLLS, CHARGES, RULES AND REGULATIONS OF SERVICE OF (INSERT NAME OF SMALL TELEPHONE COMPANY)

(Insert name of small telephone company) plans to change its (tariffs) on file with the State Corporation Commission, effective for service rendered on and after (effective date). As a result of this change, (insert name of small telephone company) expects its (tariffs) to produce an additional $__________ in gross annual operating revenues, representing an increase of __________% in local operating revenues.

(If applicable) The telephone company also proposes to change the following portions of its rules and regulations of service: (Summarize changes).

Any interested party may review (insert name of small telephone company) proposed changes during regular business hours at the telephone company office where consumer bills may be paid and at the commission's Division of Communications located on the 9th Floor of the Tyler Building, 1300 East Main Street, Richmond, Virginia.

Any interested party may file written comments in support of or objecting to the proposed changes, or requests for hearing, with the Division of Communications, State Corporation Commission. Requests for hearing must state the reason for the request. Such comments or requests must be filed with the Division of Communications on or before (name date 10 days before the effective date of tariff).

(NAME OF SMALL TELEPHONE COMPANY)

A small telephone company shall mail the foregoing notice to any customer subject to the tariff change, including other common carriers utilizing the utilities' facilities when the proposed changes directly affect other common carriers.

Statutory Authority

§ 12.1-13 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 18, Issue 4, eff. October 17, 2001.

20VAC5-403-40. State Corporation Commission action.

A. Whenever the lesser of 5.0% or 150 customers subject to a small telephone company's tariffs file a protest or objection to any change in a schedule of that utility's tariffs, or if the commission acts on its own motion to investigate the utility's tariffs, the commission may suspend the enforcement of any or all of the proposed tariffs for a period not exceeding 150 days from the date of the filing of the revised tariff. Notice of the suspension shall be given by the commission to the small telephone company prior to the expiration of the 30 days' notice to the public.

B. Whenever the lesser of 5.0% or 150 customers subject to a small telephone company's tariffs file a protest or objection to any change in a schedule of that utility's tariffs, or if the commission, acting on its own motion, determines to investigate the utility's change in a tariff, an order will be issued by the commission setting a date by which the small telephone company shall file an application which shall contain the information set forth in 20VAC5-403-50 and 20VAC5-403-60, as applicable. This order shall also specify a filing schedule for applicant, protestants, and staff and shall establish a hearing date.

Statutory Authority

§ 12.1-13 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 18, Issue 4, eff. October 17, 2001.

20VAC5-403-50. Contents of application for a rate increase by a company having more than $3 million in gross annual operating revenue or that is a subsidiary of a telecommunications company.

A. An application for a rate increase filed pursuant to this chapter by a small telephone company having more than $3 million in gross annual operating revenue or that is a subsidiary of a telecommunications company, which means a corporation that owns, manages, or controls any plant or equipment for the conveyance of voice or data messages, either directly or indirectly to or for the public, shall include:

1. The name and post office address of the applicant and the name and post office address of its counsel (if any);

2. A clear description of the proposed tariff changes, and a narrative explaining why an increase in rates is needed, as well as the overall percentage increase in rates proposed;

3. All direct testimony by which the applicant expects to support the rate increase. In lieu of prefiling direct testimony, the applicant may submit an affidavit which certifies that the information in the application is correct and that the applicant adopts the information contained in the schedules as its evidence in support of the application.

4. Exhibits consisting of Schedules 1 through 16 shown in the Appendix to this chapter shall be submitted with the applicant's direct testimony or affidavit adopting the information contained in the schedules.

5. Exhibits consisting of additional schedules may be submitted with the applicant's direct testimony. Such schedules shall be identified as Schedule 17 et seq.

B. All applications shall be filed in an original and 15 copies with the exception of Schedule 12. Two copies of Schedule 12 shall be filed directly with the commission's Division of Utility Accounting and Finance. Additional copies of Schedule 12 shall be made available to parties upon request. An application shall not be deemed filed with the commission for the purposes of §§ 56-238 and 56-240 of the Code of Virginia unless all information required is filed in conformity with this chapter and accompanying schedules.

C. The selection of a test period is up to the applicant. However, the use of overlapping test periods shall not be permitted.

D. 1. The applicant shall serve a copy of the information required in subdivisions A 1 and A 2 of this section upon the Commonwealth's Attorney and Chairman of the Board of Supervisors of each county (or equivalent officials in counties having alternate forms of government) in this Commonwealth affected by the proposed rate increase and upon the mayor or manager and the attorney of every city and town (or on equivalent officials in towns and cities having alternate forms of government) in this Commonwealth affected by the proposed rate increase.

2. The applicant shall also serve each such official with a statement that a copy of the complete application may be obtained at no cost by making a request either orally or in writing to a specified officer of the applicant.

3. The applicant shall serve a copy of its complete application upon the Division of Consumer Counsel, Office of the Attorney General.

4. All service specified by this section shall be made either by (i) personal delivery, or (ii) by first-class mail, postage prepaid, to the customary place of business or the residence of the person served.

Statutory Authority

§ 12.1-13 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 18, Issue 4, eff. October 17, 2001; amended, Virginia Register Volume 29, Issue 23, eff. July 1, 2013.

20VAC5-403-60. Contents of an application for a rate increase by a small telephone company having less than $3 million in gross annual operating revenues and that is not a subsidiary of a telecommunications company.

A. An application for a rate increase filed pursuant to this chapter by a small telephone company having less than $3 million in gross annual operating revenues and that is not a subsidiary of a telecommunications company as that term is defined in 20VAC5-403-50 A need only file exhibits consisting of Schedules 1 through 4 and 7 through 16, shown in the Appendix to this chapter, but shall otherwise comply with the requirements of 20VAC5-403-50.

B. A company having less than $3 million in gross annual operating revenue and that is not a subsidiary of a telecommunications company may use its State Corporation Commission Annual Operating Report filed with the commission as the data base for its Capital Structure and Cost of Capital Statement (Schedule 1). Schedules 9 and 10 for these companies should reflect total company, per books amounts. Jurisdictional separations included in columns 2 and 3 of Schedules 9 and 10 are not required for these companies.

Statutory Authority

§ 12.1-13 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 18, Issue 4, eff. October 17, 2001.

20VAC5-403-70. Exemptions.

A small telephone company subject to the Small Investor-Owned Telephone Utility Act (§ 56-531 et seq. of the Code of Virginia) shall be exempt, for all purposes, from the Rules Governing Utility Rate Increase Applications and Annual Informational Filings, 20VAC5-201, as they may be modified from time to time.

Statutory Authority

§§ 12.1-13 and 56-585.1 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 25, Issue 9, eff. January 1, 2009.

APPENDIX A

Schedule 1
Capital Structure and Cost of Capital Statement

Instructions: This schedule shall state the amount of each capital component per balance sheet, the amount for ratemaking purposes, the percentage weight in the capital structure, the component cost, and the weighted capital cost, using the format of the attached schedule. This information shall be provided for the test period. In Part A, the test period information should be compatible with the State Corporation Commission Annual Operating Report. The methodology used in constructing the capital structure should be consistent with that approved in the applicant's last rate case. If the applicant wishes to use a different methodology (including a change in cost of equity) in constructing its capital structure in a rate application, it may prepare an additional schedule labeled as Schedule 1(a) explaining the methodology used and justifying any departure from applicant's last rate case.

The amounts and costs for short-term debt, revolving credit agreements, and similar arrangements shall be based on a 13-month average over the test year, or, preferably, a daily average during the test year, if available. All other test period amounts are end-of-year. The component weighted cost rates equal the product of each component's capital structure weight for ratemaking purposes times its cost rate. The weighted cost of capital is equal to the sum of the component weighted cost rates.

Schedule 1
Capital Structure and Cost of Capital Statement Test Period

A. Capital Structure Per Balance Sheet ($)

Short-Term Debt

Customer Deposits

Other Current Liabilities

Long-Term Debt

Common Equity

Investment Tax Credits

Other Tax Deferrals

Other Liabilities

Total Capitalization

B. Capital Structure Approved for Ratemaking Purposes ($)

Short-Term Debt

Long-Term Debt

Job Development Credits

Cost-Free Capital

Common Equity

Total Capitalization

C. Capital Structure Weights for Ratemaking Purposes (%)

Short-Term Debt

Long-Term Debt

Job Development Credits

Cost-Free Capital

Common Equity

Total Capitalization (100%)

D. Component Capital Cost Rates (%)

Short-Term Debt

Long-Term Debt

Job Development Credits

Cost-Free Capital

Common Equity (Authorized)

E. Component Weighted Cost Rates (%)

Short-Term Debt

Long-Term Debt

Job Development Credits

Cost-Free Capital

Common Equity (Authorized)

Weighted Cost of Capital

Schedule 2
Schedule of Bonds, Mortgages, Other Long-Term Debt, and Cost-Free Capital

Instructions: Provide a description of each issue, amount outstanding, percentage of total capitalization, and annualized cost based on the embedded cost rate. These data shall support the debt cost contained in Schedule 1. Provide a detailed breakdown of all cost-free capital items contained in Schedule 1.

Schedule 3
Schedule of All Short-Term Debt, Revolving Credit Agreements, and Similar Arrangements

Instructions: Provide data and explain the methodology used to calculate the cost and balance contained in Schedule l for short-term debt, revolving credit agreements, and similar arrangements.

Schedule 4
Stockholders' Annual Report

Instructions: Provide a copy of the most recent stockholders' annual report and SEC Form 10K (if SEC Form 10K is available).

Schedule 5
Company Profitability and Capital Markets Data

Instructions: This schedule shall be prepared by companies having more than $3 million in gross annual operating revenue which are not a subsidiary of a telecommunications company, using the definitions provided below and the format of the attached schedule. These companies shall provide data for the two most recent calendar years plus the test period. This information shall be compatible with the latest Stockholders' Annual Reports (including any restatements).

Definitions

Return on Year-End Equity* =

Earnings Available for Common Stockholders

Year-End Common Equity

Return on Average Equity* =

Earnings Available for Common Stockholders

The Average of Year-End Equity for the Current & Previous Year

Earnings Per Share (EPS) =

Earnings Available for Common Shareholders

Average No. Common Shares Outstanding

Dividends Per Share (DPS) = Common Dividends Paid Per Share During the Year

Payout Ratio = DPS/EPS

Average Market Price** = (Yearly High + Yearly Low Price)/2 (if known)

*Job Development Credits shall not be included as part of equity capital nor shall a deduction be made from earnings for a capital charge on these Job Development Credits.

**An average based on monthly highs and lows is also acceptable. If this alternative is chosen, provide monthly market prices and sufficient data to show how the calculation was made.

Schedule 5
Company Profitability and Capital Market Data Test Period

A. Ratios

Return on Year-End Equity

Return on Average Equity

Earnings Per Share

Dividends Per Share

Payout Ratio

Market Price of Common Stock:

Year's High

Year's Low

Average Price

B. External Funds Raised

External Funds Raised -- All Sources (itemized)

Dollar Amount Raised

Coupon Rate (if applicable)

Rating Service (if applicable)

Average Offering Price (for Stock)

Schedule 6
Coverage Ratios and Cash Flow Profile Data

Instructions: This schedule shall be prepared using the definitions and instructions given below and using the format of the attached schedule for the past two calendar years plus the test period.

- Interest (lines 3, 4, 5) shall include amortization of discount expense and premium on debt without deducting an allowance for borrowed funds used during construction.

- Income taxes (line 2) shall include federal and state income taxes (in Virginia gross receipts tax should be considered State income tax).

- Earnings before interest and taxes (line 6) equals net income plus income taxes plus total interest = (line 1) + (line 2) + (line 5).

- IDC (line 8), where applicable, is total IDC - allowance for borrowed and other funds.

- Cash flow generated (line 14) = (line 1) + (line 9) + (line 10) + (line 11) + (line 12) - (line 8) - (line 13).

- Construction expenditures (line 15) is net of IDC.

Coverage definitions for Schedule 6

Pre-Tax Interest Coverage =

Earnings before Interest & Taxes

=

line 6

Interest

line 5

Common Dividend Coverage =

Cash Flow Generated

=

line 14

Common Dividends

line 16

Cash Coverage of Construction Expenditures =

Cash Flow Generated

=

line 14

Construction

line 15

Schedule 6
Coverage Ratios and Cash Flow Data Test Period

Interest Coverage Ratios

a. Pre-Tax Method

Cash Flow Coverage Ratios

a. Common Dividend Coverage

b. Cash Flow Coverage of Construction Expenditures

Data for Interest Coverage

Line 1. Net Income

Line 2. Income Taxes

Line 3. Interest on Mortgages

Line 4. Other Interest

Line 5. Total Interest

Line 6. Earnings Before Interest and Taxes

Line 7. Estimated Rental Interest Factor (SEC)

Data for Cash Flow Coverage

Line 1. Net Income

Line 8. Interest During Construction (IDC)

Line 9. Amortization

Line 10. Depreciation

Line 11. Change in Deferred Taxes

Line 12. Change in Investment Tax Credits

Line 13. Preferred Dividends Paid

Line 14. Cash Flow Generated

Line 15. Construction Expenditures

Line 16. Common Dividends Paid

Schedule 7
Comparative Balance Sheets

Instructions: Provide a comparative balance sheet for the test period and the corresponding 12-month period immediately preceding the test period.

Schedule 8
Comparative Income Statement

Instructions: Provide a comparative income statement for the test period and the 12-month period immediately preceding the test period.

Schedule 9
Rate of Return Statement

Instructions: Use the format of the attached schedule. Column 1 should state the Applicant's total Company per books results for the test period. Non-jurisdictional amounts will be shown in Column 2, and Column 3 will reflect Virginia jurisdictional amounts. Adjustments to test period per books results shall be shown in Column 4. These adjustments shall be explained in Schedule 11. If a calendar year test period is used, Column 1 can be prepared from information filed by Applicant in its annual report to the commission. If a calendar year test period is used, operating revenue line items can be found in Schedule 34 at page 58 of the Annual Report. "Depreciation and Amortization" is set forth on Line 23 of Schedule 35 at page 60 of the Annual Report. "Operating and Maintenance Expense" can be derived by subtracting the amount of depreciation and amortization expense from total operating expenses (Schedule 35, line 68). Interest on customer deposits must be calculated from Applicant's books. Column 6 should show the increase requested by Applicant.

Schedule 9
Rate of Return Statement Test Period

Total Company Per Books

Virginia Non-Jurisdic. Amounts

Jurisdic. Amounts

Amounts Adjustments

Effect of After Adjustments

After Proposed Increase

Proposed Increase

Col. (1)

Col. (2)

Col. (3)

Col. (4)

Col. (5)

Col. (6)

Col. (7)

Operating Revenues

Local Service

Toll Service

Access Charges

Miscellaneous

Less: Uncollectible

Total Revenues


Operating Expenses

Operating and Maintenance Expense

Depreciation and Amortization

Income Taxes

Taxes Other than Income Taxes

Gain/Loss on Property Disposition

Total Expenses


Operating Income

Less: Charitable Donations

Interest Expense on Customer Deposits

Net Operating Income -- Adjusted

Plus: Other Income (Expense)

Less: Interest Expense

Preferred Dividend Expense

JDC Capital Expense

Income Available for Common Equity

Allowance for working capital

Net Utility Plant


Total Rate Base


Total Capital for Ratemaking


Common Equity Capital


Rate of Return Earned on Rate Base


Rate of Return Earned on Common Equity

Schedule 10
Statement of Net Original Cost of Utility Plant and Allowances for Working Capital for the Test Year

Instructions: This schedule should be constructed using the ratemaking policies, procedures, and guidelines last prescribed for Applicant by the commission. The schedule should indicate all property held for future use by account number and the date of the planned use should be shown. In a footnote, applicant should identify the amount of plant and working capital devoted to non-regulated business activities, if any. Such plant shall not be included in the rate base. Applicants should use the format described below. The unamortized balance of investment tax credits shall be deducted from the rate base if the telephone company is subject to Option 1 treatment under I.R.S. Code § 46(f). Column (4) adjustments should be explained and detailed in Schedule 11. Columns (2) and (3) only apply to companies with over $3,000,000 in gross annual operating revenues which are subsidiaries of telecommunications companies.

Schedule 10
Net Original Cost of Utility Plant and Allowances

Total Company Per Books

Non-Jurisdic. Amounts

Jurisdic. Amounts

Adjustments

Amounts After Adjustments

Col. (1)

Col. (2)

Col. (3)

Col. (4)

Col. (5)

Telephone Plant in Service

Telephone Plant under construction

Property held for future use

Gross Plant


Less: Reserve for Depreciation

Net Telephone Plant


Allowance for Working Capital


Materials and supplies (13-month average)

Cash (20 days of O&M expenses)

Total Allowance for Working Capital


Other Rate Base Deductions:

Customer Deposits

Deferred Federal Income Taxes

Customer Advances for Construction

Option 1 Investment Tax Credits

Total Other Rate Base Deductions


Rate Base

Schedule 11
Explanation of Adjustments to Book Amounts

Instructions: All ratemaking adjustments to test period operations (test period and proforma) are to be fully explained in a supporting schedule to the applicant's Schedules 9 and 10. Such adjustments shall be numbered sequentially beginning with operating revenues. Supporting data for each adjustment, including the details of its calculation, should be provided. Examples of adjustments include:

1. Adjustments to annualize changes occurring during the test period.

2. Adjustments to reflect known and certain changes in wage agreements and payroll taxes occurring in the test period and proforma period (the 12-month period following the test period).

3. Adjustments to reflect depreciation and property taxes based on end-of-period plant balances.

4. Adjustments relating to other known changes occurring during the test period or proforma period.

5. Amounts relating to known and certain changes in company operations that take place in the proforma period can be adjusted through the end of the rate year. The rate year shall be defined as the 12 months following the effective date of new rates. The proforma period shall be defined as the 12 months immediately following the test year.

Schedule 12
Working Papers

Instructions: Provide detailed work papers and supporting schedules of all proposed adjustments. Two copies of this exhibit shall be filed with the commission's Division of Utility Accounting and Finance. Copies shall be provided to other parties on request. Each schedule shall identify sources of all data. Data shall be clearly identified as actual or estimated.

Schedule 13
Revenue and Expense Schedule

Instructions: The applicant shall provide information about revenues by primary account (consumer classification) and operating and maintenance expenses by primary account during the test period.

The applicant shall also provide a detailed explanation of all revenue and expense item increases and decreases of more than 10% during the test period as compared to the 12-month period immediately preceding the test period. Worksheets used to compute the percentage change should be available for review upon request.

Schedule 14
Explanation of Proposed Revenue Requirement Calculation

Instructions: Provide a schedule describing the methodology used to determine the revenue requirement shown on Schedule 9, Column 6.

Schedule 15
Additional Revenues

Instructions: Show the calculations of the additional gross revenues and percentage increases by customer classes that would be produced by the new rates during the test period.

Schedule 16
Statement of Compliance

Instructions: Include the following statement signed by the person(s) sponsoring the application:

I, (Name of Sponsoring Party), (Title), affirm that this application complies with the commission's rules for small investor-owned telephone utilities' applications for increases in rates, and I further affirm that the schedules filed to support the application comply with the instructions for the schedules set forth in the Appendix to those rules.

(Signature of Sponsoring Party)

(Date)

Statutory Authority

§ 12.1-13 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 18, Issue 4, eff. October 17, 2001; amended, Virginia Register Volume 29, Issue 23, eff. July 1, 2013.



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