**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | *  | WCB/Pricing 05-31            |
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| Roosevelt County Rural Telephone | ** |                              |
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| Cooperative, Inc.                | *  |                              |
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| Petition to Include the          | ** |                              |
| Interstate Portion of a          |    |                              |
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| Prepaid Accumulated              | *) |                              |
| Post-Retirement Benefit          | ** |                              |
| Obligation, Recorded in Account  |    |                              |
| 1410, in the Rate Base           | *  |                              |
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**ORDER**

**Adopted:** March 14, 2006 **Released:** March 14, 2006

By the Commission:

# INTRODUCTION

1.  On October 25, 2004, Roosevelt County Rural Telephone Cooperative
    Inc., (Roosevelt) requested Commission approval to include in its
    rate base the interstate portion of prepaid post-retirement health
    benefits recorded in Account 1410, Other noncurrent assets.[^1] As
    discussed below, we grant Roosevelt's request.

    **II. BACKGROUND**

2.  On December 26, 1991, the Common Carrier Bureau (Bureau) released an
    order that required carriers to adopt a new accounting standard
    issued by the Financial Accounting Standards Board \-- *Statement of
    Financial Accounting Standards No. 106, Employers' Accounting for
    Postretirement Benefits Other Than Pensions* (SFAS-106).[^2] On May
    4, 1992, the Bureau released Responsible Accounting Officer Letter
    No. 20, Uniform Accounting for Postretirement Benefits Other Than
    Pensions in Part 32, which provided guidance on the accounting and
    rate base treatment of certain postretirement benefits (OPEBs)
    recorded pursuant to SFAS-106.[^3] RAO Letter 20 instructed carriers
    to record unfunded OPEB liabilities in Account 4310, Other long-term
    liabilities, and to record prepaid OPEBs in Account 1410, Other
    noncurrent assets.[^4] RAO Letter 20 also instructed carriers to
    deduct OPEB liabilities recorded in Account 4310 from the rate base
    and to add prepaid OPEB assets recorded in account 1410 to the rate
    base.[^5]

3.  In June 1992, several carriers filed applications for review of RAO
    Letter 20. In an order and notice of proposed rulemaking released
    March 7, 1996, the Commission affirmed RAO Letter 20's accounting
    instructions, vacated the ratemaking instructions, and adopted an
    NPRM proposing amendments to Part 65, Subpart G of its rules, to
    address the ratemaking treatment of OPEBs.[^6] The Commission found
    that RAO Letter 20 exceeded the Bureau's delegated authority to the
    extent that it directed exclusions from and additions to the rate
    base for which the Part 65 rules do not specifically provide.[^7] In
    the NPRM it proposed, however, to adopt the same ratemaking
    treatment that had been set forth in RAO Letter 20.[^8]

4.  On February 20, 1997, the Commission released an order amending Part
    65 with regard to the ratemaking treatment of OPEBs.[^9] With regard
    to OPEB liabilities recorded in Account 4310, the Commission adopted
    the RAO Letter 20 position, i.e., carriers were required to deduct
    such liabilities from the rate base.[^10] With regard to amounts
    recorded in Account 1410, however, the Commission found that its
    current rules were adequate to determine what, if any, of the assets
    recorded in Account 1410 should be included in the rate base. The
    Commission held that, if a carrier could show that any of its assets
    recorded in Account 1410 (including prepaid OPEB amounts) meet the
    used-and-useful standard, those assets would be allowable in the
    rate base.[^11] Nevertheless, section 65.820(c) of the rules
    provides that Account 1410 amounts can be included in the rate base
    "only to the extent that they have been specifically approved by
    this Commission for inclusion."[^12]

    **III. DISCUSSION**

5.  As a benefit to its employees, Roosevelt offers post-retirement
    health insurance. This benefit is funded through a pre-funding trust
    sponsored by the National Telephone Cooperative Association
    (NTCA).[^13] As of December 31, 2003, Roosevelt's audited financial
    statements reflected an OPEB-related balance in Account 1410 of
    \$314,288.[^14] In accordance with section 65.820(c) of our rules,
    Roosevelt seeks approval to include the interstate portion of the
    prepaid OPEB amounts in the rate base, beginning with the date the
    prepayments were made. In response to a staff request for further
    information,[^15] Roosevelt states that the prepayments associated
    with the OPEB costs will reduce future expenses, and it included a
    memorandum from the NTCA's Benefits Administrator confirming the
    reduction in expenses.[^16]

6.  Under our rules, noncurrent assets recorded in Account 1410 may be
    included in the rate base when a carrier makes a showing that these
    assets are used and useful in the provision of telecommunications
    services.[^17] Our rate base treatment of prepaid OPEB costs
    recorded in Account 1410 is similar to that for prepaid pension
    costs. We allow a certain amount of prepaid pension costs in the
    rate base because pension fund prepayments in excess of the cost
    calculation earn a return which benefits the ratepayer by reducing
    later expenses.[^18] That rationale applies equally to prepaid OPEB
    costs. Thus, any prepaid OPEB costs that meet the used and useful
    standard will be allowed, similar to prepaid pension costs.

7.  We conclude that Roosevelt has demonstrated that the prepaid OPEBs
    costs recorded in Account 1410 meet the used-and-useful standard. As
    set forth in the memorandum from NTCA's Benefits Administrator,
    these prepaid costs will reduce future expenses, thus benefiting
    ratepayers.[^19] We therefore grant Roosevelt's request to include
    the interstate portion of the OPEBs costs recorded in Account 1410
    in its rate base beginning with the date the prepayments were made.

    **IV. ORDERING CLAUSE**

8.  Accordingly, IT IS ORDERED, pursuant to sections 1, 4(i), 4(j),
    201-205, 218, 220, and 403 of the Communications Act of 1934, as
    amended, 47 U.S.C. §§ 151, 154(i)-(j), 201-205, 218, 220, and 403,
    and Part 65 of the Commission\'s Rules, 47 C.F.R. Part 65, that the
    request by Roosevelt County Rural Telephone Cooperative, Inc., to
    include the interstate portion of its prepaid postretirement
    benefits other than pensions recorded in Account 1410 in its rate
    base IS GRANTED as set forth herein.

9.  IT IS FURTHER ORDERED, pursuant to section 1.103(a) of the
    Commission's rules, 47 C.F.R. § 1.103(a), that this Order SHALL BE
    EFFECTIVE upon release.

    FEDERAL COMMUNICATIONS COMMISSION

    Marlene H. Dortch

    Secretary

[^1]: Letter from Scott Arnold, General Manager, Roosevelt County Rural
    Telephone Cooperative, Inc., to Chief, Wireline Competition Bureau,
    Federal Communications Commission (October 25, 2004)(Roosevelt
    Letter Request).

[^2]: *Notification of Intent to Adopt Statement of Financial Accounting
    Standards No. 106,* *Employers' Accounting for Postretirement
    Benefits Other Than Pensions,* AAD 91-80, Order, 6 FCC Rcd 7560 (CCB
    1991). The Common Carrier Bureau is now known as the Wireline
    Competition Bureau.

[^3]: *Uniform Accounting for Postretirement Benefits Other Than
    Pensions in Part 32*, 7 FCC Rcd 2872 (CCB 1992) (RAO Letter 20).

[^4]: *Id*. OPEBs are postretirement benefits other than pensions. *See
    1993 Annual Access Tariff Filings Phase 1, 1994 Annual Access Tariff
    Filings*, CC Docket Nos. 93-193, *et al*., Order Terminating
    Investigation, 20 FCC Rcd 7672, 7673, para. 1 (2005)(*2005 OPEBs
    Tariff Order*). The *2005 OPEBs Tariff Order* contains a
    comprehensive discussion of the regulatory treatment of OPEBs by the
    Commission, 1991 to present.

[^5]: RAO Letter 20.

[^6]: *Responsible Accounting Officer Letter 20, Uniform Accounting for
    Postretirement Benefits Other Than Pensions in Part 32, Amendments
    to Part 65, Interstate Rate of Return Prescription Procedures and
    Methodologies, Subpart G, Rate Base*, CC Docket No. 96-22, AAD
    92-65, Memorandum Opinion and Order and Notice of Proposed
    Rulemaking, 11 FCC Rcd 2957 (1996).

[^7]: *Id*. at 2961, para. 25.

[^8]: *Id*. at 2962-63, paras. 30-34.

[^9]: *Responsible Accounting Officer Letter 20, Uniform Accounting for
    Postretirement Benefits Other Than Pensions in Part 32, Amendments
    to Part 65, Interstate Rate of Return Prescription Procedures and
    Methodologies, Subpart G, Rate Base*, CC Docket No. 96-22, AAD
    92-65, Report and Order, 12 FCC Rcd 2321 (1997) (*Report and
    Order*).

[^10]: *Id*. at 2327, para. 18.

[^11]: *Id*. at 2325, para. 12.

[^12]: 47 C.F.R. § 65.820(c).

[^13]: Roosevelt Letter Request at 1.

[^14]: *Id.*

[^15]: Letter from Clifford Rand, Deputy Chief, Pricing Policy Division,
    to Kenneth Burchett, Vice President, GVNW Consulting, Inc. (March
    11, 2005).

[^16]: Letter from Cecile Archibeque, Assistant General Manager,
    Roosevelt County Rural Telephone Cooperative, Inc., to Clifford
    Rand, Deputy Chief, Pricing Policy Division (March 17, 2005).

[^17]: 47 C.F.R. § 65.800.

[^18]: *Report and Order*, 12 FCC Rcd at 2325, para. 12.

[^19]: *See supra* n.16.