Opinion ID: 1187953
Heading Depth: 1
Heading Rank: 6

Heading: Station Connection Charges

Text: Mountain Bell incurs expenditures associated with the installation of station apparatus, inside wiring, and related activities. These expenditures are referred to collectively as station connection charges. In the past, these expenditures were fully capitalized. However, in 1981 the Federal Communications Commission (FCC) released an order requiring phone companies to phase in, over a four-year period, full expense treatment of these expenditures. Amendment of Part 31, 85 FCC 2d 818 (1981). Thus, Bell is to expense 25% of its station connection charges in 1981, 50% in 1982, 75% in 1983, and 100% in 1984. With the FCC's permission, Mountain Bell will recognize each of these accounting changes as of January 1 in each of the years involved. The Commission has recognized the 25% expensing method for 1981. However, Mountain Bell's request that the Commission recognize the 50% expensing method for 1982 was denied. The Commission did allow known changes in 1982 expenses for employee benefits, Social Security, and postage fees. Mountain Bell asserts that the 50% expensing method is similar to those items and should therefore be permitted. The counter argument is that permitting Mountain Bell's request will result in a mismatching of revenues, expenses and investment, since Mountain Bell's actual 1982 performance is not known at present. After considering this question on the merits, we conclude that the Commission properly refused Mountain Bell's request. The change in accounting procedures will not merely affect the level of expenses recognized by Bell; it will also reduce the growth in Mountain Bell's rate base and affect Mountain Bell's revenues, since customers will be charged directly for 50% of the station connection charges. Mountain Bell has asked for an increase in revenue in 1982 to cover the increased expense, but it has not shown what effect increased revenue and reduced capitalization will have. We do not favor separate, formal rate hearings for each of the incremental changes necessitated by this phase-in program. We hold that Mountain Bell must make a more complete analysis of the effect of the automatic changes, which could then be incorporated in the rate structure. The Commission could then treat this phase-in program in the same manner it treated the Social Security and other changes. In this instance, however, Mountain Bell has not yet given the Commission adequate analysis of the impact of the accounting changes.