[Federal Register Volume 62, Number 61 (Monday, March 31, 1997)]
[Rules and Regulations]
[Pages 15117-15118]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8040]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 65

[CC Docket No. 96-22; FCC 97-56]


Interstate Rate of Return Prescription Procedures and 
Methodologies

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: On February 19, 1997, the Commission adopted a Report and 
Order that amends the Commission's rules with respect to other 
postretirement benefits other than pensions (OPEBs). This Order also 
denies an MCI petition for reconsideration of the Commission's March 7, 
1996, Order (Vacate Order), that rescinded ratemaking instructions for 
OPEBs given by the Common Carrier Bureau in Responsible Accounting 
Officer Letter No. 20 (RAO 20). The intended effect of the rules is to 
standardize the Commission's rate base rules with respect to similar 
types of assets and liabilities.

EFFECTIVE DATE: April 30, 1997.

FOR FURTHER INFORMATION CONTACT: Thaddeus Machcinski, Accounting and 
Audits Division, Common Carrier Bureau, (202) 418-0808.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order adopted February 19, 1997, and released February 20, 1997. 
The full text of this Commission decision is available for inspection 
and copying during normal business hours in the FCC Public Reference 
Room (Room 230), 1919 M St., NW., Washington, DC. The complete text of 
this decision may also be purchased from the Commission's copy 
contractor, International Transcription Service, Suite 140, 2100 M 
Street, NW., Washington, DC 20037.

Summary of Report and Order

    1. On March 7, 1996, the Commission released an Order (Vacate 
Order), (61 FR 9968, March 12, 1996), rescinding the rate base 
instructions issued by the Common Carrier Bureau (Bureau) in RAO 20. 
With that Order, we also issued a Notice of Proposed Rulemaking (NPRM) 
(61 FR 9968, March 12, 1996), that proposed amendments to Part 65, 
Subpart G to address the ratemaking treatment of OPEBs.
    2. On April 8, 1996, MCI filed a Petition for Reconsideration of 
the Vacate Order. MCI requests that the Commission reconsider its 
decision to rescind the rate base instructions for OPEBs set forth in 
RAO 20.
    3. In this Order, we amend Part 65 of our rules to include OPEBs in 
ratemaking and to remove all items

[[Page 15118]]

recorded in Account 4310, Other long-term liabilities, that were 
derived from above-the-line expenses from the interstate rate base. We 
also deny MCI's petition for reconsideration of the Vacate Order.
    4. In the NPRM, we proposed that prepaid OPEBs recorded in Account 
1410, Other noncurrent assets, should be included in the interstate 
rate base. In this Order, we have decided not to adopt our proposal 
automatically to include prepaid OPEBs in the interstate rate base. We 
find our current rules are adequate to determine what, if any, of the 
assets recorded in Account 1410 should be included in the rate base. 
Therefore, if a carrier can show that any of its assets recorded in 
Account 1410 (including prepaid OPEBs) meet the used-and-useful 
standard, we will allow that asset to be included in the interstate 
rate base. This decision is consistent with our treatment of similar 
costs, such as prepaid pension costs. A certain amount of prepaid 
pension costs are allowed in the rate base because these costs can earn 
a return that later reduces expenses. Thus, any prepaid OPEB costs that 
meet the used and useful standard will be included in the interstate 
rate base.
    5. In the NPRM, we also proposed to amend Sec. 65.830 to remove 
from the interstate rate base the interstate portion of all accrued 
liabilities recorded in Account 4310, Other long-term liabilities. In 
this Order we have decided to modify our proposal so that only those 
zero-cost sources of funds that result from above-the-line expenses are 
removed from the rate base. Thus, only those liabilities recorded in 
Account 4310 that are derived from the expenses specified in 
Sec. 65.450(a) will be removed from the rate base.
    6. In the NPRM, we noted that the Bureau in RAO 20 directed 
carriers to remove accrued OPEB liabilities recorded in Account 4310, 
Other long-term liabilities, from their rate bases on the basis that 
OPEB benefits are similar to pension benefits, which are deducted from 
the rate base pursuant to part 65. The Bureau concluded that accrued 
OPEB costs should receive similar rate base treatment. We believe the 
Bureau was correct in that conclusion. Moreover, in the NPRM, we noted 
that all accrued liabilities recorded in Account 4310 represent zero-
cost sources of funds including accrued pension and OPEB liabilities. 
We therefore proposed to accord to all items recorded in Account 4310 
the same treatment currently accorded to pensions. After reviewing the 
comments in this proceeding, we conclude that, because the amounts 
recorded in Account 4310 are zero-cost sources of funds, rates should 
not provide a return on those amounts. Accordingly, we adopt our 
proposal except as modified in the preceding paragraph.
    7. Finally, we state that the conclusion in the Vacate Order that 
the Bureau did not have the delegated authority to amend the Part 65 
rules in RAO 20 was correct. MCI's petition for reconsideration does 
not refute this conclusion. Accordingly, the Order denies MCI's 
petition for reconsideration.

Ordering Clauses

    Accordingly, it is ordered, pursuant to Section 4(i) and 405 of the 
Communications Act of 1934, 47 U.S.C. Secs. 154(i) and 405 that the 
Petition for Reconsideration filed April 8, 1996, by MCI 
Telecommunications Corporation is denied.

    It is further ordered, that pursuant to Sections 1, 4(i), 4(j), 201 
through 205, 220, and 403 of the Communications Act of 1934, as 
amended, 47 U.S.C. Secs. 151, 154(i), 154(j), 201 through 205, 220 and 
403, Part 65, Subpart G of the Commission's Rules, 47 CFR Part 65, 
Subpart G, is amended as shown below, effective April 30, 1997.
    It is further ordered, that the Secretary shall serve a copy of 
this Order on each state commission.
    It is further ordered, that the Secretary shall send a copy of this 
Report and Order including the Final Regulatory Flexibility Analysis, 
to the Chief Counsel for Advocacy of the Small Business Administration 
in accordance with paragraph 605(b) of the Regulatory Flexibility Act, 
Public Law 96-354, 94 Stat. 1164, 5 U.S.C. Secs. 601 et seq. (1981).

List of Subjects in 47 CFR Part 65

    Communications common carriers, Reporting and recordkeeping 
requirements.

Federal Communications Commission.
William F. Caton,
Acting Secretary.

Rule Changes

    Part 65 of Title 47 of the Code of Federal Regulations is amended 
as follows:
    1. The authority citation for part 65 continues to read as follows:

    Authority: 47 U.S.C. 151, 154, 201, 202, 203, 204, 205, 218, 
219, 220, 403.

    2. Section 65.830 is amended by revising paragraphs (a)(3) and (c) 
to read as follows:


Sec. 65.830  Deducted items.

    (a) * * *
    (3) The interstate portion of other long-term liabilities (Account 
4310) that were derived from the expenses specified in Sec. 65.450(a).
* * * * *
    (c) The interstate portion of other long-term liabilities (Account 
4310) shall bear the same proportionate relationship as the interstate/
intrastate expenses which gave rise to the liability.
[FR Doc. 97-8040 Filed 3-28-97; 8:45 am]
BILLING CODE 6712-01-P