California CPCN WIR BondThe California PUC released a draft report of the Performance Bond Workshop in the rulemaking to revise the certification/registration processes for telephone companies, including wireless carriers.  The PUC’s Communications Division (CD) asked the parties to review the Workshop Report on Phase II of R.11-11-006 on the Performance Bond for Certificates of Public Convenience and Necessity and Wireless Identification Registration Holders (Report) for its accuracy only and to submit comments by  May 8, 2014. Comments on policy or legal issues are not requested at this time. The Report summarizes participants’ comments and discussions during the December 3, 2013, work session. It includes discussion on (A) Criteria for determining revisions to the existing Performance Bond Requirement (amount of the bond, terms and conditions of the bond, applicability), (B) Exemptions to the Performance Bond Requirement, and (C) Alternatives to a Performance Bond.


In PUC Decision (D) 13-05-035 all CPCN holders (Certificates Of Public Convenience And Necessity) and all WIR carriers (Wireless Identification Registration) were ordered to obtain a performance bond in the amount of $25,000. The PUC said it would consider a relook at the bond amount during Phase II of the rulemaking. Carriers of Last Resort (COLR) were exempt from the requirement to obtain a performance bond. The PUC also revised the certification processes for wireline carriers and the registration process for wireless carriers. The PUC said it would address whether to extend the registration requirements to VoIP providers. TMI Regulatory Bulletin Service subscribers see California Bulletin dated 6/5/13.

See TMI’s earlier blog postings:  California Order Revises Certification Process For CPCN And WIR dated 5/24/13 and California PUC – Performance Bond from CPCN and WIR dated 6/6/13.


Workshop Report  

Without having attended the workshop, TMI is uncertain whether any of the discussions addressed whether a CPCN or WIR bond has ever been called upon in California or any other state. It appears from this summary that the topic was not addressed.  The draft Report as circulated for comments on accuracy describes, among other things, the discussion on the following issues.


Amount of Performance Bond

Most participants support the $25,000 bond amount. The Office of Ratepayer Advocates (ORA) commented that the $25,000 is acceptable but is concerned that this amount may be too small for larger companies. ORA also asked whether there is current information available on the level of fines ordered to be collected and if not, suggested going back to the 2007 Audit Report.


Terms and Conditions of the Performance Bond

The participants support establishing a limited term or sunset of the bond requirement for carriers that are in “good standing” for a number of years. The suggested time frame was three or five years. The participants also discussed the criteria for being in good standing.


Applicability of Performance Bond

The California Cable & Telecommunications Association (CCTA) believes that facilities-based carriers and their affiliates should not be required to post separate bonds and should be treated in the same manner as ILECs. CALTEL agreed.


Exemptions to the Performance Bond Requirement

CALTEL observed that the exemption granted to CLECs and WIRs that are affiliates of a COLR is unfair since carriers that are competitors of these exempt CLECs and WIRs have to file bonds. The “Small LECs” reminded the participants that D.13-05-035 exempts URF and General Rate Case ILECs where they serve as COLRs and their wholly owned/majority owned affiliates, and Cox Communications where it serves as the COLR, from the requirement to obtain a performance bond.


Alternatives to a Performance Bond

The use of an irrevocable letter of credit as an alternative to the performance bond was suggested. CD commented that its research indicates that the irrevocable letter of credit is a financial instrument used in trade transactions, which would involve the

submissionof bill of California PUClading, documentation on the delivery/acceptance of goods shipped, etc. The CD asked for feedback from participants on how an irrevocable letter of credit would work with respect to the  collection of fines, fees, surcharges, taxes, penalties, and restitution. ORA proposed an alternate option of creating a pool of money paid for by the carriers and using that fund to pay off the any money owed by a bad carrier.




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