COMMISSION WASHINGTON UTILITIES AND ) TRANSPORTATION COMMISSION, ) Docket No. UT-970766 Complainant, ) Volume 11 ) Pages 533 - 768 vs. ) U S WEST COMMUNICATIONS, INC., ) Respondent. ) -------------------------------) A hearing in the above matter was held on December 11, 1997 at 9:00 a.m. at 1300 South Evergreen Park Drive Southwest, Olympia, Washington, before Chairwoman ANNE LEVINSON, Commissioners RICHARD HEMSTAD, WILLIAM R. GILLIS and Administrative Law Judge C. ROBERT WALLIS. The parties were present as follows: U S WEST COMMUNICATIONS, INC. by LISA ANDERL and DOUGLAS OWENS, Attorneys at Law, 1600 7th Avenue, Room 3206, Seattle, Washington 98191. FOR THE PUBLIC, ROBERT F. MANIFOLD Assistant Attorney General, 900 Fourth Avenue, Suite 2000, Seattle, Washington 98164. WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION STAFF, by GREGORY TRAUTMAN, Assistant Attorney General, 1400 South Evergreen Park Drive Southwest, Olympia, Washington 98054. Cheryl Macdonald, CSR Court Reporter APPEARANCES (Cont'd.) MCI, by ROGELIO PENA, Senior Attorney, 707 17th Street, Suite 3600, Denver, Colorado 80202 and CLYDE MACIVER, Attorney at Law, 4400 Two Union Square, 601 Union Street, Seattle, Washington 98101. TRACER, by ARTHUR BUTLER, Attorney at Law, 5450 Two Union Square, 601 Union Street, Seattle, Washington 98101. I N D E X WITNESS: DIRECT CROSS REDIRECT RECROSS EXAM CULP 536 623 633 614 636 635 INOUYE 639 643 665 666 GRATE 669 673 737 742 BOWLING 746 748 766 EXHIBITS: MARKED ADMITTED 17 (Withdrawn) 17A 537 537 27 587 588 20 608 51T 639 643 52 639 643 55 639 643 56 639 643 57 641 643 61T 669 672 62 669 672 63 669 672 64C 669 672 65C 669 672 66C 669 672 67C 669 672 68 669 685 69c 669 684 70 (WITHDRAWN) 71C 669 684 72C 669 684 73 669 737 74 669 684 75 669 684 76 669 684 77 669 684 78 669 684 79 669 684 80 669 684 81 669 684 82C 669 684 83 669 684 84C 669 684 70A 673 717 85 726 737 91T 745 748 92 745 748 93C 745 748 94 745 748 95 745 748 96 745 748 98 745 748 99 745 748 100C 745 748 RECORD REQU. PAGE 1 545 2 621 3 662 P R O C E E D I N G S JUDGE WALLIS: Let us be back on the record for our Thursday, December 11, 1997 session in the matter of Commission docket UT-970766. At this point Mr. Culp is on the stand. Mr. Culp, I will merely note that you have been previously sworn. You may resume the stand at this time, and we interrupted Mr. Manifold in his cross-examination to conclude for the day yesterday. So, Mr. Manifold. MR. MANIFOLD: Thank you, Your Honor. Whereupon, WAYNE CULP, having been previously duly sworn, was called as a witness herein and was examined and testified further as follows: CROSS-EXAMINATION BY MR. MANIFOLD: Q. Good morning, Mr. Culp. A. Morning. JUDGE WALLIS: I would note that Mr. Manifold has distributed revised document designated PC 09213. The original has been identified and received in evidence as Exhibit 17, and the revision I'm marking substituted 17A. May we treat the original as withdrawn? MR. MANIFOLD: Yes, Your Honor. The reason for the substitution is that the response -- this is a response to a data request and it was supplemented, and the supplemented version has the original plus the supplementation, so withdrawing that does not lose any information. JUDGE WALLIS: Thank you very much. MR. OWENS: We have no objection to the admission of the substitute exhibit. JUDGE WALLIS: So 17A is received. Thank you, Mr. Owens. (Marked and Admitted Exhibit 17A.) Q. Mr. Culp, I have a few follow-up questions on areas we discussed yesterday, and then I hope to go to more numerical sorts of things. We spoke yesterday about the part of your testimony where you said the company asked you to come to an agreement with staff as to the appropriate revenue requirement for the make whole concept. Do you recall your testimony about that? A. Yes, I recall that. Q. Did the company ask you to do the same thing with public counsel? A. No, it didn't. Q. Did it ask you to do the same thing with AARP? A. No, it didn't. Q. Did it ask you to do the same thing with TRACER? A. No, it didn't. Q. Did it ask you to do the same thing with MCI? A. No, it didn't. Q. Without going through the rest of the service list, did it ask you to do the same thing with any of the other parties who were in the company's last rate case? A. No, it didn't. Q. Is it the company's view that its refund obligation or potential liability, assuming the Supreme Court upholds the Commission's '95 order, justifies including RSA 3, the proforma adjustment in this case, that takes out the revenues the company actually received to put revenues at the level of the '95 ordered case? A. Let me make sure I get the first part of your question. You're saying if the Supreme Court upholds the Commission decision? Q. Yes? A. Then RSA 3 would be appropriate as is stated in the case. Q. Because of the refund obligation? A. Because of -- the refund obligation is -- Q. If you will, let me start over. I know that was a long question. I want to ask you about RSA 3 which is the restating adjustment to remove from the company's revenues in '96 those revenues which it received but would not have if it had implemented the '95 rate case; is that correct? A. It does more than that. It annualizes the effect of the Commission's decision in that case. Q. What's the amount of the adjustment? A. It says post tax net operating income. It's negative $64,555,000. Q. Would that be about $100 million in revenue? A. Order of magnitude, yes. Q. You said it went beyond the refund amount. Do I understand what you're saying is that the company's potential liability for a refund would begin as of the effective date of the tariffs that were filed or the Commission's order? I don't want to get into exactly what that date is, but that generally is the date? A. Generally May of '96. Q. In this restating adjustment you reduced revenues to the ordered level for the entire year, that is, from January through