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California High Cost Fund – A 
Rate Case Process & Standards

The California High Cost Fund-A (CHCF-A) is a subsidy program established by the CPUC in 1987, based on the principle of universal service -- the concept that basic telephone service should be affordable and ubiquitously available to all members of society. The Fund provides the subsidy via supplemental revenues (paid through surcharges on customers’ telephone bills statewide) to 14 small local telephone companies  to ensure basic telephone rates between rural and urban customers are comparable. See more History.  

In November 2011, the CPUC opened a Proceeding to review the High Cost Fund-A program, seeking stakeholder input to determine whether program policies should be updated given current market conditions including regulatory and technological changes.  

In March 2014, the CPUC issued an amended Scoping Memo outlining issues to be resolved in, including: 

  • Whether broadband revenues / profits should count towards the intrastate revenue requirement.   
  • What costs, if any, can be standardized. 
  • How the CPUC should account for federal subsidy changes.  
  • What metrics should be used to develop rates for basic telephone service.  
  • Whether and how to establish “fair-market rates” for affiliate use of regulated networks.  

The CPUC held Public Participation Hearings in rural communities around the state between April 17 - May 8, 2014.  

The CPUC held Evidentiary Hearings September 2 - 4, 2014. 

CPUC Decision

In December 2014, the CPUC issued a Decision, ordering: 

  • Small carriers to increase their monthly rate for Basic Telephone Service between $30 to $37 (fees and surcharges included), with actual rates to be set in individual General Rate Cases. 
  • Use of FCC formula to cap corporate expenses, which will be implemented in individual General Rate Cases. 
  • CPUC staff to commence a Broadband Network and Competition Study in the first quarter of 2015 (to be completed within 18 months).  

The CPUC Decision also found that the CPUC has the legal authority to count broadband revenue towards the carriers' intrastate revenues. However, the CPUC chose not to apply such imputation at this time  because the small telephone carriers are each in different stages of broadband deployment. The CPUC determined that it would consider future regulatory frameworks in a subsequent proceeding. 


ORA Position

In order to optimally utilize ratepayer subsidies, ORA supports CHCF-A improvements that will result in program and rate case processing efficiencies. The CPUC's December 2014 Decision adopted ORA's positions that the small telephone companies should: 

  • Count the net broadband revenue of each affiliate against the company’s revenue requirement as a condition of participating in the CHCF-A Program, although it declined to implement the policy finding that some carriers still need such financial incentive to promote broadband deployment. 
  • Use the Federal Communications Commission’s (FCC) standards to limit the company’s corporate operations expenses in order to incent these companies to operate more efficiently.  

See ORA’s December 8, 2014 Opening Comments on the CPUC’s Phase 1 Proposed Decision.  

See ORA’s December 15, 2014 Reply Comments on the CPUC’s Phase 1 Proposed Decision.  


See ORA's July 11, 2014 Testimony.   

See ORA’s August 15, 2014 Reply Testimony 

See ORA’s September 26, 2014 Opening Briefs   



Proceeding Docket

See the Proceeding docket.  




Rate Case Plan for Small Telephone Companies  

CPUC's High Cost Fund-A Webpage