Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Time Warner Entertainment/ ) Advance-Newhouse Partnership, ) Time Warner Entertainment Company, L.P., ) File No. PA 98-002 Florida Cablevision Management Corporation, ) Cablevision Industries Limited Partnership, ) TWI Cable, Inc., Community CATV Corp., ) Ultracom of Dade County, Inc. and ) Paragon Communications ) ) Complainants, ) ) v. ) ) Florida Power & Light Company ) ) Respondent. ) ORDER Adopted: June 8, 1999 Released: June 9, 1999 By the Chief, Cable Services Bureau: 1. In this Order we address a complaint ("Complaint") under Section 224 of the Communications Act filed by Time Warner Entertainment/Advance-Newhouse Partnership, Time Warner Entertainment Company, L.P., Florida Cablevision Management Corporation, Cablevision Industries Limited Partnership, TWI Cable, Inc., Community CATV Corp., Ultracom of Dade County, Inc. and Paragon Communications ("Complainants"), alleging that Florida Power & Light Company ("FPL") has imposed unjust and unreasonable rates for cable television pole attachments. Section 224 empowers the Federal Communications Commission ("Commission") to adjudicate disputes between cable television system operators and utilities concerning alleged unjust and unreasonable pole attachment rates in the absence of state regulation. The Complaint was filed on April 13, 1998. FPL's Response was filed May 4, 1998 ("Response"). No timely reply was filed by Complainants. 2. Complainants, or their predecessors in interest, are a group of cable television systems that serve cable television subscribers in the State of Florida. At various dates, Complainants entered into Pole Attachment Agreements with FPL, substantially in the format of two examples provided as part of the Complaint ("Agreements"). Pursuant to the Agreements, Complainants have attached distribution facilities to poles, and are currently charged at the rate of $6.00 per pole attachment annually, calculated by FPL using data from a subaccount 369.1. After consideration of the pleadings, we find that FPL's rates are unjust and unreasonable and that a refund is warranted. 3. Section 1.1409(b) of our rules states that a complainant shall have the burden of establishing a prima facie case that the rate, term or condition is not just and reasonable. FPL argues that Complainants failed to establish its prima facie case as required. The Complaint contains information required under Section 1.1404 (a-g), although FPL disputes the accuracy of some of the information. We conclude that the Complaint is sufficient and Complainants establish a prima facie case under our rules. 4. Section 1.1404(i) of our rules governs the procedural aspects of filing a complaint with the Commission. It requires that the disclosure of any steps taken to resolve the disputes or reasons why such steps would be fruitless if none were taken. Complainants assert that negotiations with FPL have been fruitless and have provided a copy of a letter from FPL in which FPL refuses to adjust its rate. We are satisfied that Complainants have observed our preference for negotiated settlement of disputes. 5. Section 1.1409(c) of our rules provides that the maximum "just and reasonable" rate for pole attachments is to equal the percentage of the total usable space occupied by the pole attachment times the sum of the operating expenses and actual capital costs of the utility attributable to the entire pole. See In the Matter of Adoption of Rules for the Regulation of Cable Television Pole Attachments, First Report and Order, CC Docket 78-144 ("First Report and Order"). This rule, expressed as a formula, is as follows: Maximum Space Occupied by CATV x (Operating Expenses + Capital Costs of Poles) Rate = Total Usable Space We generally calculate the sum of operating expenses and capital costs of poles by multiplying the net cost of a bare pole times the carrying charges, so that the formula ("Cable Formula") becomes: Maximum Space Occupied by CATV x Net Cost of a Bare Pole x Carrying Charges Rate = Total Usable Space 6. A component of the carrying charges is maintenance expense. The Commission adopted procedures to identify and calculate the maintenance expenses for use in the carrying charge rate component, as a ratio of expenses included in the utility's pole maintenance account to net pole investment in the Matter of Amendment of Rules and Policies Governing the Attachment of Cable Television Hardware to Utility Poles, Report and Order CC Docket No. 86-212, ("Pole Attachment Order"). For purposes of the calculation of the maintenance element, the denominator is the net pole investment which equals the sum of gross pole investment, minus depreciation reserve related to poles, minus accumulated deferred income taxes related to poles. The Commission adopted the following formula to determine the maintenance element of the carrying charge rate component for use by electric utility pole owners: Maintenance = Account 593 (maintenance of overhead lines) Expense Investment in, minus deprec. in, minus accum. deferred income taxes related to: Accounts 364, 365, & 369 In the instant case, the parties' dispute centers on whether FERC account 369 must be used when FPL has separated this account into costs for overhead and underground purposes as a part of a depreciation study prepared for FERC. 7. The methodology used to arrive at a pole attachment rate should be simple and, preferably, based on publicly identifiable and verifiable data. FERC established its Part 101, prescribing a system of accounts for public utilities and licensees subject to FERC's accounting requirements under the Federal Power Act. Using information provided by FPL and applying the formula established in Section 1.1409(c) of the Commission's rules, Complainants calculate a maximum just and reasonable rate of $5.80 per pole attachment per year. Complainants urge us to substitute this rate for the rate of $6.00, and order the appropriate refunds. FPL asserts its rate of $6.00 is justified by substituting a subaccount 369.1 for account 369. 8. We decline to waive our existing methodology to adopt FPL's suggested approach to calculating the maintenance element of the carrying charge rate component of the Cable Formula. Our methodology is consistent with Congressional intent to provide a fair but expeditious methodology for calculating just and reasonable pole attachment rates. We also reject FPL's modification because adjustments to one account would necessitate adjustments to other accounts and "unduly complicate the pole attachment rate calculation process without materially increasing its accuracy." The Commission has affirmed the use of the total amount of expenses reported in FERC Form 1 account 369 (Services) in cases in which electric utility pole owners have attempted to reduce the denominator of the maintenance element formula. Therefore, we will use the publicly available data submitted in account 369 from the utility's annual regulatory reports to calculate the Cable Formula to determine the maximum just and reasonable pole attachment rate. 9. The Complainants' and FPL's calculations differ in only two aspects other than the use of subaccount 369.1. First, our rules require that a pole attachment complaint provide the total number of poles owned or used by the utility as well as the number of jointly-owned poles and the percentage of each joint pole or the number of equivalent poles owned by the utility. The total number of poles owned is necessary to determine the per pole cost, a factor in several calculations of the Cable Formula. The Complainants and FPL used slightly different pole counts (FPL suggests this is due to a typographical error on Complainants' part), and we used the total number of poles owned provided by FPL. 10. Second, the rate of return element used in the Cable Formula as a part of the carrying charges is derived from the rate authorized for a utility's intrastate services by the appropriate state regulatory body. Under our rules, when the rate of return is at issue in a pole attachment complaint, the utility is required to provide a copy of the latest decision of the state regulatory body or state court which establishes such a rate of return in its pleading. Complainants use a rate of return of 0.0958 in calculating the rate it proposes; FPL uses a rate of return of 0.0956. In our calculations of the maximum just and reasonable rate in this matter, we use the rate of return provided by FPL. 11. By applying our findings to the Cable Formula (as set forth in Attachment A to this Order), we arrive at a maximum just and reasonable rate of $5.79 per pole. Thus, based on the facts presented, under Section 224 of the Communications Act and our underlying rules, $5.79 is the maximum just and reasonable rate per pole attachment, per year, that FPL may charge. As noted however, FPL was charging $6.00 per pole attachment per year, during the period from the filing of the Complaint, April 13, 1998 to the present. Consequently, we find that FPL's pole attachment rate, effective April 13, 1998, is unjust and unreasonable. Therefore, we will order FPL to reimburse the Complainants for any charges over the amount of the maximum permitted annual pole attachment rate of $5.79 per pole, beginning April 13, 1998 through the present, plus interest. 12. Accordingly, IT IS ORDERED, pursuant to Sections 0.321 and 1.1401-1.1413 of the Commission's rules, 47 C.F.R. 0.321 and  1.1401-1.1413, that the relief requested in the Complaint IS GRANTED TO THE EXTENT INDICATED HEREIN. 13. IT IS FURTHER ORDERED, pursuant to Sections 0.321 and 1.1410(a) of the Commission's rules, that the annual rate of $6.00, effective April 13, 1998 to the present, for each pole attachment arising out of the Agreements between Florida Power & Light Company and Complainants, IS UNREASONABLE and IS TERMINATED, effective upon the release of this Order. 14. IT IS FURTHER ORDERED, pursuant to Sections 0.321 and 1.1410(b) of the Commission's rules, that the annual rate of $5.79 for each pole attachment IS SUBSTITUTED for the existing rate in the Agreements of $6.00, effective upon the release of this Order. 15. IT IS FURTHER ORDERED, pursuant to Sections 0.321 and 1.1410(c) of the Commission's rules, that Florida Power & Light Company SHALL REFUND to Complainants, within thirty (30) days of the release of this Order, that portion of the amount paid in excess of $5.79, plus interest to the date of refund, for service received from April 13, 1998 to the present, plus interest. FEDERAL COMMUNICATIONS COMMISSION Deborah A. Lathen Chief, Cable Services Bureau Attachment A Pole Attachment Formulas and Calculations Time Warner, et al. v. Florida Power & Light Company PA 98-002 Maximum Rate Space Occupied by CATV (A) 1 Total Usable Space (B) 13.5 Net Cost of a Bare Pole (C) $234.29 Carrying Charge Rate (D) 0.3335 Maximum Rate per Pole (A\B) x C x D $5.79 Net Cost of a Bare Pole (1) Gross Pole Investment $451,528,237 (2) Depreciation Reserve $171,408,082 (3) Net Current Deferred Operating Income Taxes $915,539,034 (4) Net Noncurrent Deferred Operating Income Taxes N/A (5) Net Deferred Operating Income Taxes (L(3)+L(4)) N/A (6) Gross Plant Investment N/A (7) Net Deferred Operating Income Taxes (Poles) ((L(1)/L(6) x L(5)) N/A (8) Net Investment (Poles) (L(1)-L(2)-L(7)) $280,119,918 (9) Net Investment (Bare Pole) (L(8) x .85 ) $238,101,931 (10) Number of Poles 1,016,275 (11) Net Cost of a Bare Pole (L(9)/L(10)) $234.29 Carrying Charge Rate (1) Administrative Charge 0.0288 (2) Maintenance Charge 0.0576 (3) Depreciation Charge 0.0500 (4) Taxes 0.1015 (5) Return on Investment 0.0956 (6) Total Carrying Charge (L(1)+L(2)+L(3)+L(4)+L(5)) 0.3335 Administrative Charge (1) Total G&A Expenses $259,621,513 (2) Net Plant Investment $9,015,843,556 (3) Administrative Charge (L(1)/L(2)) 0.0288 Maintenance Charge (1) Maintenance Expense $51,482,861 (2) Net Investment (Poles) $894,231,860 (3) Maintenance Charge (L(1)/L(2)) 0.0576 Depreciation Charge (1) Depreciation Rate 0.031 (2) Gross Pole Investment $451,528,237 (3) Net Investment (Poles) $280,119,918 (4) Depreciation Charge (L(1) x (L(2)/L(3)) 0.0500 Taxes (1) Total Current and Deferred Taxes $915,539,034 (2) Net Plant Investment $9,015,843,556 (3) Taxes (L(1)/L(2)) 0.1015 Return on Investment Authorized by State Regulatory Commission 0.0956