Massachusetts DTC Applies Pole Attachment Rate Formula to Municipal Lighting Plants

Today, the Massachusetts Department of Telecommunications and Cable (“DTC”) issued an Order holding that the pole attachment rate formula adopted by the Massachusetts Department of Telecommunications and Energy (“DTE”) in 1998 (the “Massachusetts Formula”) and used by investor-owned utilities (“IOUs”) also applies to municipally-owned electric utilities in Massachusetts, which are known in the Commonwealth as municipal lighting plants (“MLPs”). The Order establishes that all MLPs in Massachusetts (there are approximately 40) must apply this same formula, which closely follows the FCC’s cable formula, to compute pole attachment rental rates, unless there is mutual agreement for a different approach.

Background

In 1998, the DTE adopted a pole attachment rate formula during a protracted complaint proceeding involving a group of cable operators and a large IOU. As noted above, the resulting formula – dubbed the Massachusetts Formula – is fundamentally similar to the FCC cable formula. The only other pole attachment rate decision issued by the DTE later in 1998 also involved an IOU.  Thus, the present complaint proceeding (Docket DTC 14-2) between a cable operator and Peabody Municipal Light Plant (“PMLP”) was the first complaint in which the DTC had been asked to apply the Massachusetts Formula to an MLP.

Summary of the Order

The pertinent Massachusetts pole attachment statute, G.L. c. 166, § 25A (“§ 25A”), expressly applies to all pole owning utilities in Massachusetts, including IOUs and MLPs. PMLP nonetheless argued on policy grounds that the DTC should adopt a formula specifically for MLPs different from the Massachusetts Formula.

First, PMLP argued that the Massachusetts Formula results in a “cross-subsidy” between electric ratepayers and third-party attachers, claiming that the formula does not account for a utility pole’s support space. The DTC flatly rejected this argument, finding, as it had in the two 1998 decisions, that the Massachusetts Formula “results in a fully-allocated pole attachment rate in accordance with the requirements of [§ 25A] because it includes the full costs of a utility’s investment in poles, as well as its on-going maintenance costs for both useable and support space.” There was nothing different about MLPs in this regard.

Next, the Department rejected PMLP’s argument that various other statutory differences between IOUs and MLPs not pertaining to pole attachments somehow warranted a different pole rate formula for MLPs. The DTC found that the Massachusetts Legislature unambiguously intended to hold both IOUs and MLPs to the same standard for determining pole rental rates and that none of the statutory differences asserted by PMLP required a different rate formula or yielded an unjust result for MLPs.

Finally, the Department found that the Massachusetts Formula is sufficiently flexible to accommodate any differences between IOUs and MLPs, such as the fact that MLPs do not incur income tax expense. Specifically, the DTC held that “while there may be differences in some of the inputs between MLPs and IOUs, the Massachusetts Formula would still result in a just and reasonable, fully-allocated pole attachment rate when applied to MLPs.”

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The DTC issued an earlier order in June establishing a two phase inquiry into, first, whether the Massachusetts Formula applies to PMLP and second, what the resultant pole attachment rate for PMLP should be under § 25A. Today’s Order concludes Phase I of the proceeding by affirming that PMLP’s pole attachment rental rate should be determined using the Massachusetts Formula. The application of the formula to determine a just and reasonable rental rate based on PMLP’s specific pole costs and operational data and expenses will be addressed in Phase II, which commences immediately. Please contact us if you have questions or would like more information about this proceeding.