STATE OF VERMONT
PUBLIC SERVICE BOARD
Docket No. 7270
Joint Petition of Verizon New England Inc.,
d/b/a Verizon Vermont, certain affiliates thereof,
and FairPoint Communications, Inc., for approval
of an asset transfer, acquisition of control by
merger and associated transactions
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PREFILED REBUTTAL TESTIMONY OF DAVID HALLQUIST
Summary:
Mr. Hallquist’s testimony responds to the rebuttal testimony submitted by Peter G. Nixon on
behalf of FairPoint Communications, Inc. and by Pamela J. Porell on behalf of Verizon New
England, Inc. d/b/a Verizon Vermont as that testimony relates to issues raised in Mr. Hallquist’s
May 24, 2007 prefiled testimony.
Vermont Electric Cooperative, Inc.
Prefiled Rebuttal Testimony of David Hallquist
August 10, 2007
Page 1 of 7
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Q1.
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Please state your name.
Response:
My name is David Hallquist.
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Q2.
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Vermont Electric Cooperative (“VEC”) in this proceeding?
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Are you the same David Hallquist who previously filed testimony on behalf of
Response:
Q3.
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Yes.
What is the purpose of your testimony?
Response:
I will respond to the rebuttal testimony submitted by Peter G. Nixon on
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behalf of FairPoint Communications, Inc. (“FairPoint”) and by Pamela J. Porell on behalf of
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Verizon New England, Inc. d/b/a Verizon Vermont (“Verizon Vermont”) as that testimony
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relates to issues raised in my May 24, 2007 prefiled testimony.
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Dual Pole Issue
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Q4.
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informal process that the Department convened last year and not as part of this docket. Do
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you agree?
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Verizon contends that the dual pole issue should be addressed as part of the
Response:
No. This is a long-standing problem that needs the attention of the Public
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Service Board. Concerns about Verizon Vermont’s failure to remove obsolete poles in a timely
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manner were first raised at least five years ago when the DPS requested information from VEC
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(and I assume from other Vermont distribution utilities as well) as to where dual pole lines
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existed on VEC’s system. After continued complaints from customers and municipalities, the
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Department convened workshops in 2006. Although those workshops were useful in identifying
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issues between Verizon and the electric utilities, progress has been slow, and at this time neither
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Verizon Vermont nor anyone else has developed a systematic proposal for removing unneeded
Vermont Electric Cooperative, Inc.
Prefiled Rebuttal Testimony of David Hallquist
August 10, 2007
Page 2 of 7
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poles throughout the state. VEC has also raised this issue to Verizon annually in the joint
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management team meetings that are held to discuss issues between the companies, again with no
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results.
Verizon Vermont’s testimony is typical of its general approach to this issue. While it
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makes general pledges to resolve issues in a collaborative manner, it quibbles over the
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interpretation of the Joint Ownership Agreement to justify its delay in removing old poles. The
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result is that no action is taken, and VEC continues to have many miles of pole lines where
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Verizon has failed to move its attachments to the new poles or has failed to remove the old poles.
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This creates not only aesthetic issues for our members but safety issues, as well, because the old
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poles are often in poor condition.
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Q5.
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What do you recommend the Board to do?
Response:
As noted in my May 24 prefiled testimony, the Board should include as a
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condition to any order approving the sale to FairPoint that Verizon Vermont and/or FairPoint
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develop and implement a plan (1) to identify all locations where Verizon Vermont has yet to
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relocate its lines to a new pole line and/or to remove old poles, and (2) to set a schedule for
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relocating all such lines and removing the old poles. This is consistent with the recommendation
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of the Department that Verizon Vermont and FairPoint be required to work with the electric
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utilities to prepare an inventory of all dual pole lines and develop a remediation plan to address
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the problem. While Verizon Vermont objects to inclusion of such a condition in the Board order,
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FairPoint said that it generally agreed to imposition of the condition that I had proposed,
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although it suggested that it be allowed six months to finalize the schedule. VEC would not
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object to that time frame.
Vermont Electric Cooperative, Inc.
Prefiled Rebuttal Testimony of David Hallquist
August 10, 2007
Page 3 of 7
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Q6.
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What if the acquisition is not completed?
Response:
In the event that the Board denies the petition in this docket or the
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acquisition fails to be completed for other reasons, VEC would like the Board to take appropriate
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action to ensure that Verizon Vermont, as the continued owner, addresses the dual pole issue.
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This could be a condition in a final order dismissing the petition or an order opening a new
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docket incorporating evidence from this docket on the dual pole issue. It would not be a good
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result for VEC’s members or the state as a whole to allow Verizon Vermont to return to business
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as usual.
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Pole Inventory/Inspection
Both Verizon Vermont and FairPoint disagree with VEC’s suggestions that (1) they
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Q7.
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share in the cost of pole inspection and treatment, and (2) that they participate in a joint
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pole survey. Why should the Board adopt such requirements?
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Response:
These requirements make sense for a number of reasons. First, an
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inspection and maintenance program is an important practice for utilities to increase reliability,
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improve safety, and significantly increase the life of utility poles. Verizon Vermont states that it
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“conducts inspections of the poles in its maintenance area,” but VEC is unaware that it has
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implemented any systematic inspection and treatment program. In fact, VEC was sued in recent
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years as a result of injuries suffered by an Adelphia worker when a jointly-owned pole in
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Verizon Vermont’s set area broke. The pole was clearly rotten. I believe that it is important to
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implement a systematic inspection and treatment program throughout our service territory
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(regardless of set area). As joint owner on most poles, Verizon (and, if the sale closes, FairPoint)
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benefits from this program and should share in the cost.
Vermont Electric Cooperative, Inc.
Prefiled Rebuttal Testimony of David Hallquist
August 10, 2007
Page 4 of 7
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Second, a pole survey will provide benefits to both VEC and Verizon Vermont/FairPoint.
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The pole survey will (1) provide the coordinates of each pole that will be used in a Geographic
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Information System which can be made available on a state-wide database, (2) provide both
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companies and the state with an accurate record of the pole plant inventory, and (3) provide an
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assessment of pole attachments. In addition, it will facilitate identification of dual pole locations,
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which as discussed above, needs to be done in any event.
Third, both the pole inspection and pole survey will be very beneficial to FairPoint’s
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proposed broad band initiative. One of the most significant benefits that FairPoint touts as
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resulting from this sale is the deployment within 24 months of a broadband infrastructure.
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Presumably that infrastructure will be installed on existing poles. As part of the installation,
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FairPoint will need to know both the condition of the poles and the configurations (e.g., size and
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other attachments) to see if the existing poles can accommodate the new attachments. A
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coordinated effort combining a survey with pole inspections will provide this needed information
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and lay the groundwork for the proposed broadband build out.
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Past Due Amounts
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Q8.
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manner should be addressed in the DPS collaborative process. Do you agree?
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Verizon Vermont contends that VEC’s complaints about not getting paid in a timely
Response: No. One of the criteria the Board must consider in reviewing this transaction
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is its effect on other Vermont utilities (and their customers) who have ongoing contractual
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relationships with Verizon Vermont. Despite its denials, Verizon Vermont has outstanding
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balances due to VEC that are over 90 days old. In addition, there are numerous instances where
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VEC has completed construction of a line, notified Verizon Vermont of the completion, but has
Vermont Electric Cooperative, Inc.
Prefiled Rebuttal Testimony of David Hallquist
August 10, 2007
Page 5 of 7
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not received a signed the notification (Exchange of Notice) form accepting 50 % joint
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ownership of the poles within the time frame required under the Joint Ownership Agreement.
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This notification allows VEC to bill Verizon for its share of the poles. Delays in processing
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these Exchange of Notice forms means VEC is not getting paid in a timely way. This issue is
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exacerbated in the VEC territory because VEC has pole setting responsibility for roughly 70% of
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the territory. Essentially VEC has been placed in a position of a subcontractor, doing the line
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work, then chasing down Verizon to pay its share. VEC wants to be sure that any company
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acquiring Verizon’s contractual obligations will live up to them. While I appreciate the
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assurances in FairPoint’s testimony that it will honor the agreements it assumes, I again ask the
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Board to condition this sale on settlement by Verizon Vermont of all past due amounts and for
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work completed on “jointly owned poles” which are not invoiced to date, because Verizon has
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not returned the Exchange of Notice.
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Tree Trimming
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Q9.
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Joint Ownership Agreement in asking that Verizon be required to share in trimming costs.
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Is that true?
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Verizon Vermont contends that you are asking the Board to modify a term of the
Response: To a certain extent, yes. Although I was not CEO in 2001 when the Joint
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Ownership Agreement and Intercompany Operating Procedures were agreed to, I believe that it
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was everyone’s understanding that tree trimming costs would be shared according to the
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percentages set out in IOP #12. Verizon Vermont apparently shared that understanding as well,
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since they paid their percentage to VEC for many years. They abruptly reversed course in 2006
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and refused to pay. Although the language in IOP #12 states that participation in tree trimming
Vermont Electric Cooperative, Inc.
Prefiled Rebuttal Testimony of David Hallquist
August 10, 2007
Page 6 of 7
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is optional, I think that term is inconsistent with the parties’ intentions. I also think it is unfair
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for Verizon to receive the benefits of VEC’s trimming, but share none of the costs. As I
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understand it, the Board has the authority to modify parties’ contracts through conditions in its
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orders, if such action is necessary to promote the public good. VEC continues to seek a
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condition in any final order requiring Verizon or the acquiring company to participate in its fair
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share of trimming costs.
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Easements/Other Issues
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Q10. Verizon Vermont states that it has provided VEC with copies of all joint Verizon-
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VEC easements that it acquired since the effective date of IOP #14. Can you confirm that?
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Response:
No. Our records show that while Verizon Vermont has provided copies of
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a few easements (mainly in what was our Southern District), we do not usually receive copies of
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joint easements. We particularly need copies of joint easements for the former Citizens territory.
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We understood that Verizon was developing a data base of easements to provide to FairPoint and
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would like to receive a copy of all those that run jointly to VEC, which Verizon Vermont is
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required to provide under the Joint Ownership Agreement.
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Q11. What about VEC’s other issues relating to the Joint Ownership Agreement?
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Response: My original testimony discussed several issues in the Joint Ownership
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Agreement that VEC would like to see addressed, including such things as the requirement that
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easements run to both companies and notice requirements for emergency repairs that delay
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recovery effort. I appreciate the assurances of FairPoint that it is interested in working out these
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contract issues with VEC. VEC looks forward to working with FairPoint to revise problematic
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terms in the Joint Ownership Agreement.
Vermont Electric Cooperative, Inc.
Prefiled Rebuttal Testimony of David Hallquist
August 10, 2007
Page 7 of 7
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Q12. Does that conclude your testimony?
Response:
Yes.