WPC' 2B-J Z CourierCourierTimes New RomanTimes New Roman BoldX@HP LaserJet 4_230_1HPLAS4.PRS 4x  @\oeX@26 FPK3|xCourierTimes New Roman ROOM 224HPLAS4.WRSSx  @,,JX@Courier New (TT)RomanTimes New Roman (TT)Times New Roman (Bold) (TT)2AK'XKK "i~'^:DPddDDDdp4D48dddddddddd88pppX|pDL|pp||D8D\dDXdXdXDdd88d8ddddDL8ddddX`(`lD4l\DDD4DDDDDDDDd8XXXXXX|X|X|X|XD8D8D8D8ddddddddddXdbdddpdXXXXXlX~|X|X|X|XdddldldD8DdDDDdplld|8|P|D|D|8dvddddDDDpLpLpLpl|T|8|\ddddddl|X|X|Xd|DdpL|Dd~4ddC$CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxH\dDXddddd8@d<@d<DDXXdDDxddzHxxHvppDXd<"dxtldpxxd<?xxx,2x6X@`7X@7jC:,Xj\  P6G;XP7nC:,4Xn4  pG;XW!@(#,h@\  P6G;hP0000000000__t_|nnV_yy24Z_7c__nCzZhcnonvyXzXshn~|y00000000000000000000000000000000L0Ld_rw0CCL|0|0i__________00r|rV_idid_mr4GiVwmiiii_Zr_r_d_CCCi_0_dZdZ>Zi44d4i_d_QQGiVr_ZVC&Cr00000000000000000000000000000000000Z__d4di_______4|__0ZG00______V_______ddddd4444imiiiii_irrrrddi______ZZZZZ4444_i_____V_iiiiZd"i~'^:DpddȨDDDdp4D48ddddddddddDDpppd|Ld|pȐD8DtdDdpXpXDdp8Dp8pdppXLDpdddXP,PhD4htDDD4DDDDDDdDp8dddddȐXXXXXJ8J8J8J8pddddppppddpddddzpdddXXhXXXXXdddhdptL8LpLDLpphhp8ZDP8pppddƐXXXpLpLpLphfDtppppppȐhXXXpDppLDd4ddC6CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxHjdDdddddddYzzzzCCCCqodYYYYYYYYYYY8888dddddddnddddddd2Zs@Bhr<?xxx,2x6X@`7X@7jC:,Xj\  P6G;XP7nC:,4Xn4  pG;XW!@(#,h@\  P6G;hP<R&HHH,,H6X@`7h@7UC2X.xXU4  pQXW!0(X h0\  P6QhP2Coddȧ8CCdr2C28ddddddddddCCrrrdzNdzoȐC8CtdCdoYoYCdo8Co8odooYNCodddYO,OhCddddCoCȜCCddFdCNC2Cdddd,dCԍ #o\  PCXP#Pacific Bell D&J at Appendix "Direct Case filed by Pacific Bell in Suspension and Investigation Order," CC Docket No. 92101 at 9.  X- ` Sx5.` ` US West proposes in Transmittal No. 584 to adjust its PCI to reflect the  x=difference between the TBO portion SFAS106 and the ongoing incremental costs of adopting  X_- xSFAS106.z_ X# <ԍ#o\  PCXP# U S West Transmittal No. 584, D&J at 11. z US West states that it is seeking to reflect the difference between TBO exogenous  xcost treatment, already in its PCI, and the incremental OPEB costs that it may now submit for  X1- x=exogenous cost treatment based on the Southwestern Bell decision.h 1 X<ԍ #o\  PCXP#Id. at 12 to 13.h According to US West,  xjthese incremental OPEB costs were calculated using standard actuarial assumptions, including  x[that its VEBA and OPEB fund obligations that were funded on December 31, 1992 are assumed  X -to be earning a 9 percent and 8.5 return on investment, respectively.h u X<ԍ #o\  PCXP#Id. at 13 to 14.h x  X -B. MCI's Petition  X- ` nx6.` ` MCI filed a petition to suspend and investigate both the Pacific Bell and US West  xKtransmittals. MCI contends that the Commission's Responsible Accounting Official (RAO) Letter  Xb- xN24 b&  X9< xLԍ #o\  PCXP#RAO Letter 24, "#o\  PCXP#Accounting for Work Force Reduction Programs", 9 FCC Rcd 1676  X"-(Com. Car. Bur., A and A Div. 1994) (RAO Letter 24). bars Pacific Bell and US West from recovery of OPEBs until those costs are actually  XK- xincurred.c K  X<ԍ#o\  PCXP# MCI Petition at 12c According to MCI, the Commission has established that work force reduction costs  x.should be recognized when they actually occur. MCI claims that Pacific Bell and US West are  xproposing to adjust their existing PCIs for exogenous work force costs they expect to incur in  x=the future. Premature recognition of OPEBs will, according to MCI, allow both Pacific Bell and  xUS West to raise their PCIs and realize more pricing flexibility, especially for raising prices, in  X- xmonopoly access markets. _ q X%<ԍ#o\  PCXP# Id. at 8._ MCI objects to Pacific Bell's and US West's proposals to adjust  xtheir existing PCIs for costs they expect to incur in the future because it is difficult for a LEC"" 0*(("  x.to project accurately what its work force reduction expenses will be. Therefore, says MCI, the  X- xLECs should book their OPEB expenses, just as RAO Letter 24 requires, when the amounts have  xactually been funded. MCI contends that under this method, the LECs will be ensured of being  X-compensated for actual OPEB expenses. Z X4<ԍ #o\  PCXP#Id. Z  X- ` x7.` ` MCI further argues that Pacific Bell and US West do not clearly state in their  xtransmittals the basis for assuming their VEBA funds earns 8.5 percent interest and their OPEBs  xfunds earns 9 percent interest. MCI contends that these companies have the ability to earn more  XH- x=than 9 percent on these funds.fHy Xr <ԍ #o\  PCXP#Id. at 10.f In addition, MCI asks the Commission to review the amount  xof OPEBs cost Pacific Bell and US West allocated to nonregulated activities and to activities  X - x["subjecttoseparations."l * X<ԍ#o\  PCXP# MCI Petition at 1011.l MCI next argues that even if the Commission does not apply RAO  X - xLetter 24 to OPEB expenses, the potential still exists for a "doublecount" of OPEBs through  X - x=the GNPPI adjustment in the price cap formula._  Xx< xԍ #o\  PCXP#GNPPI refers to the Gross National Product Index minus a productivity factor. GNP xPI is used to calculate the annual PCI adjustment made by LECs to account for inflation in the  XJ- x>economy. See Section 61.45 of the Commission's Rules, 47 C.F.R.  61.45; Policy and Rules  xConcerning Rates for Dominant Carriers, Order on Reconsideration, 6 FCC Rcd 2637, 2641  X-(1991) (LEC Price Cap Reconsideration Order)._ Finally, says MCI, Pacific Bell and US West  xcontinue to rely on the same facts here to support OPEB exogenous cost treatment as they used  xto support OPEB costs currently under investigation in CC Docket No. 94157. MCI argues that  X -the Commission should therefore suspend and investigate these transmittals as well.i 0  X<ԍ #o\  PCXP#MCI Petition at 12.i  Xy-Replies  XK- ` %x8.` ` In their replies, Pacific Bell and US West contend that the Commission has  X4- xordered the use of SFAS106 accrual accounting for OPEB costs and that RAO Letter 24 has no  X- xbearing on this requirement. According to Pacific Bell, RAO Letter 24 states that accounting for  x<work force restructuring is an exception to the Commission policy that requires conformance with  xGenerally Accepted Accounting Procedures and Part 32 of the Commission's rules, 47 C.F.R.  X- x=Part 32.j  Xj$<ԍ#o\  PCXP# Pacific Bell Reply at 23.j US West states that it is accounting for OPEB costs in accordance with RAO Letter"0*(("  X- x20 Xy< x.ԍ#o\  PCXP# RAO Letter 20, "Accounting for Work Force Reduction Programs," 9 FCC Rcd 1676 (Com. Car. Bur. Aand A Div. 1994). which provides specific guidance as to how the effects of SFAS106 should be recorded on  X- xa carrier's books for regulatory purposes.eb X<ԍ#o\  PCXP# US West Reply at 34.e In addition, US West denies that its Transmittal No.  X- x584 contains any costs classifiable as restructuring charges under RAO Letter 24. Rather, US  xWest states, the SFAS106 costs included in Transmittal No. 584 are the incremental costs of  xaccruals which have been made on a routine basis in accordance with all applicable Commission  X-accounting requirements.Z XQ <ԍ#o\  PCXP# Id.Z  X_-  nx9. Pacific Bell and US West further contend that their projected returns on their  xyrespective VEBA and OPEB funds are generally accepted as reasonable projected returns on a  X1- xjmixed portfolio of major stocks and investment grade bonds.|1 X<ԍ#o\  PCXP# Pacific Bell Reply at 4; US West Reply at 4.| US West maintains in addition  xthat a 9 percent rate of return on SFAS106 plan assets is appropriate and is used by other  X - xcompanies.i u X)<ԍ #o\  PCXP#US West Reply at 4.i Pacific Bell and US West also state that they properly allocated the amount of  X - xkOPEBs costs allocated to nonregulated activities and activities subjecttoseparations. &  X<ԍ#o\  PCXP# Pacific Bell Reply at 4; US West Reply at 4. In  xaddition, U S West contends that its allocation of 5 percent of OPEB expenses to nonregulated  xoperations comports with Part 64 of the Commission rules and, finally, that exogenous treatment  xof SFAS106 costs will not result in doublecounting through the GNPPI adjustment in the price  X-cap formula.l  X<ԍ #o\  PCXP#US West Reply at 910.l  Xb- IV. DISCUSSION ă  X4- ` Ax 10.` ` We have reviewed Pacific Bell Transmittal No. 1773 and US West Transmittal No.  x!584, supporting documents and pleadings. We find that the issues raised by these two  x]transmittals are the same as the issues under investigation in CC Docket No. 94157. As  xindicated above, Pacific Bell and US West state that they are proposing to revise their interstate  xaccess rates to reflect an adjustment of their exogenous costs for SFAS106. While the Court  xKhas ordered the Commission to grantwhped exogenous treatment of these postemployment benefits, the  xquestion of the specific amount eligible for exogenous treatment is subject to investigation in CC  xDocket No. 94157. Therefore, we are suspending the two transmittals and including the issues presented therein in CC Docket No. 94157."| 0*((n"Ԍ X-ԙ WV. ORDERING CLAUSES ă  X- ` Ex 11.` ` Accordingly, IT IS ORDERED that, pursuant to Section 204(a) of the  xCommunications Act, 47 U.S.C.  204(a), and Section 0.291 of the Commission's Rules, 47  xC.F.R.  0.291, the revised rates set forth in Pacific Bell Tariff F.C.C. No. 1, Transmittal No.  x1773 and U S West Tariff F.C.C. No. 5, Transmittal No. 584 ARE SUSPENDED for one day  xfrom the current effective date and an investigation of those rates is included in CC Docket Nos.  x94157. Pacific Bell and U S West SHALL FILE supplements reflecting this suspension no later  xLthan five days from the release of this Order and should cite the "DA wk  number" of this Order as the authority for making this tariff filing. wk   X - ` Rx 12.` ` IT IS FURTHER ORDERED that, pursuant to Sections 4(i) and 204(a) of the  x?Communications Act, 47 U.S.C.  154(i), 204 (a), and Section 0.291 of the Commission's  xRules, 47 C.F.R.  0.291, Pacific Bell and U S West SHALL KEEP ACCURATE ACCOUNT of all amounts received that are associated with the rates that are the subject of this investigation.  X- ` x 13.` ` IT IS FURTHER ORDERED that Pacific Bell and U S West SHALL INCLUDE  xSTATEMENTS in all subsequent transmittals revising rates indicating whether, and to what  xextent, the price change is predicated upon the exogenous cost claim set forth in Transmittal  XK-Nos. 1773 and 584, respectively.;K X- x#o\  PCXP##o\  PCXP#э#o\  PCXP# We anticipate that any such transmittals will be suspended for one day, included in this investigation, and made subject to an accounting order.;  X- ` x 14.` ` IT IS FURTHER ORDERED that the petition to suspend and investigate Pacific  x.Bell Transmittal No. 1773 and U S West Transmittal No. 584 filed by MCI Telecommunications Corporation IS GRANTED to the extent discussed above and otherwise IS DENIED.  X- x` `  hhFEDERAL COMMUNICATIONS COMMISSION x` `  hhGeraldine A. Matise x` `  hhChief, Tariff Division x` `  hhCommon Carrier Bureau