Ohio Administrative Code › Title 4901:1 - Utilities › Chapter 4901:1-7 - Local Exchange Carriers › Section 4901:1-7-19 - Forward-looking economic costs

Current through all regulations passed
			 and filed through July 1, 2024
(A) The forward-looking, economic, cost-based
			 price of an element shall be set at a level that allows the providing carrier
			 to recover the sum of the total element long-run incremental cost (TELRIC) of
			 the element and a reasonable allocation of the forward-looking, joint and
			 common costs.
(B) TELRIC
(1) Principal
The TELRIC of an element is the forward-looking economic cost
				over the long-run of the total quantity of the facilities and functions that
				are directly attributable to, or reasonably identifiable as incremental to,
				such element, calculated while holding all other products' volumes
				constant.
(2) Study period
The commission will consider a cost study period of five years
				to be reasonable. An incumbent local exchange carrier (ILEC)
				
										will
				have the burden of proof, to the commission's satisfaction, that such study
				period would not be reasonable for a specific element.
(3) Federal, state, and
			 local income taxes
Federal, state, and local income tax expenses
			 
										will be
			 determined based on the TELRIC recognizing the
			 "tax-on-tax" situation that results from the deductibility of state and local
			 tax when federal taxes are paid.
(4) Inflation
TELRIC studies shall reflect costs that are expected to be
				incurred during the study period. Such costs 
										are to be
				projected to their anticipated level over the study period by using prices in
				supplier contracts or an appropriate index of future cost, such as supplier
				estimates of price changes, indices developed from labor contracts, or other
				relevant indices.
(5) Investment
			 development
(a) Material investment
(i) The development of the material component
			 of investment shall begin with the current vendor price(s) for the hardware and
			 software resources required to provide the element, projected over the study
			 period as described above.
(ii)
			 Other components of material investment 
											may include
			 inventory, supply expenses, and sales taxes.
(iii) The sales tax component of investment
			 
											is to
			 be calculated by applying a sales tax factor if applicable. The factor shall
			 reflect taxes imposed by state and local taxing bodies on material
			 purchases
											and be applied to the material and inventory
			 components.
(iv) The supply
			 component 
											may include the expense incurred by the ILEC for
			 storage, inventory, and delivery of material.
(b) Labor investment
There are two major components of labor investment,
				vendor-related and ILEC-related.
(i)
			 Vendor-related labor investment 
											includes vendor-provided installation and
			 engineering.
(ii) ILEC-related
			 labor investment may be developed based on account averages or from estimates
			 of product-specific plant engineering and installation hours.
(iii) Total labor costs
			 
											are to
			 be computed by multiplying the account average or product specific work times
			 by the appropriate labor rate.
(iv)
			 Hourly labor rates include the operational wages, benefits, paid absence, and,
			 if applicable, tools and miscellaneous expenses.
(6) Fill factors
The investment developed above shall be adjusted to reflect
				reasonably accurate "fill factors." Fill factors are the proportion of a
				facility that will be filled with network usage during the study period. The
				ILEC 
										has the burden to justify the reasonableness of the
				fill factors used in its TELRIC studies.
(7) Maintenance
Maintenance costs are incurred in order to keep equipment
				resources in usable condition.
(a)
			 Included in this classification are: direct supervision; engineering associated
			 with maintenance work; labor and material costs incurred in the upkeep of
			 plant; rearrangements and changes of plant; training of maintenance forces;
			 testing of equipment and facilities; tool expenses; and miscellaneous
			 expenses.
(b) The specific
			 maintenance cost estimates associated with the element in question or
			 investment-related annual maintenance factors may be applied to arrive at an
			 annual maintenance cost.
(c) The
			 factor 
										is
			 to be specific to the investment and expense accounts associated with the
			 element and developed from the most current data reasonably available to the
			 ILEC.
(8) The
			 forward-looking, economic, cost per unit of an element
			 
									equals
			 the forward-looking, economic cost of the element, divided by a reasonable
			 projection of the sum of the total number of units of that element that the
			 ILEC is likely to provide to requesting telephone companies and the total
			 number of units of that element that the ILEC itself is likely to use in
			 offering its own services, during the study period.
(9) In the
			 determination of the total number of units:
(a) If the ILEC offers an element on a
			 flat-rate basis, the number of units 
										are defined by the ILEC as the
			 discrete number of elements that the ILEC uses or provides (e.g., number of
			 loops or number of ports).
(b) If
			 the ILEC offers an element on a usage-sensitive basis, the number of units
			 
										are
			 defined by the ILEC as the unit of measurement of the usage (e.g., number of
			 minutes-of-use or database queries).
(10) The TELRIC of an
			 element 
									is
			 to reflect any cost-based volume discount, term discount, and/or
			 geographic-deaveraging the ILEC plans to offer.