SAN FRANCISCO — The California Public Utilities Commission ordered Pacific Bell on Tuesday to trim its annual rates by $86.4 million, effective New Year's Day.
The move will cut the average residential customer's phone bill by about 38 cents a month to $25.13, and a further reduction in the rates charged by the state's biggest phone company is likely to come next spring, the PUC said.
For residential customers of General Telephone, California's No. 2 phone company, the news was not as good: Their rates temporarily will rise Jan. 1 about 30 cents a month. But that temporary boost, an increase from average monthly charges of about $30 now, is likely to disappear by the time the PUC completes the company's rate case in May.
Rates Expected to Fall
In fact, General Telephone's rates are expected to go down then. The PUC, which is in the midst of a continuing review of the rates charged by the state's two biggest phone companies, is considering cutting the 1988 revenue of each firm by more than $500 million. Pacific Bell, under order from the PUC, already this year has pared its rates by $191 million.
For the Record
Los Angeles Times Friday December 25, 1987 Home Edition Part 1 Page 2 Column 6 Metro Desk 2 inches; 47 words Type of Material: Correction
An article published Wednesday stated that General Telephone Co. of California's authorized rate of return was lowered by the state Public Utilities Commission to 12.75% from 13.75%, but the figures were compared inappropriately with a different ratio for Pacific Bell, whose rate of return on equity is currently just under 15%.
The PUC generally is moving to cut rates because lower inflation and interest charges are translating into lower expenses for the phone companies and other utilities.
Pacific Bell and General Telephone officials, however, say the reductions proposed by the commission's staff go too far.
General Telephone particularly took issue with the commission's decision on Tuesday to cut its allowable rate of return, a measure of profitability, to 12.75% from 13.75%. Pacific Bell's rate of return was lowered earlier this year to 12.52%.
Jim Parrish, a General Telephone spokesman, cited October's stock market crash and "instability in the national securities markets" as reasons why the 13.75% return is needed for the company to continue to attract investors. The temporary rate increase granted Tuesday is intended to help the company offset the lower revenue it is receiving from long-distance companies.
Sylvia Siegel, executive director of the consumer coalition Toward Utility Rate Normalization, said she welcomed the PUC's moves to reduce telephone rates. But she expressed concern about how much benefit consumers would get from future cuts.
Toll Calls Cited
Siegel maintained, for example, that the commission and the companies have held down the basic monthly service charge for some time but have sharply reduced the area in which unlimited local calling is allowed at no extra charge. As a result, she said, consumers face increasing charges for toll calls.
For now, the Jan. 1 rate changes will be reflected on customers' bills in the form of revised surcharges--the commission's way of adjusting revenues to reflect its interim regulatory decisions.
The commission also, as expected, ordered Pacific Bell to contribute $16.5 million from its earnings to a new consumer-education fund. The unusual penalty was levied after the PUC staff uncovered abusive sales practices in the marketing of such extra-cost services as call-forwarding. Many customers signed up for these services without being told that they could obtain basic telephone service far more cheaply without them.
The funds will be used for programs to help consumers adjust to the fast-changing field of telecommunications under direction of a committee that will include consumer representatives.
Pacific Bell has already returned $27.5 million to customers who said they unwittingly signed up for the extra phone services and later requested refunds. That, however, that was less than half of what the commission anticipated. The PUC on Tuesday told Pacific Bell to conduct a second notification and refund campaign.
Both rate cases have been before the commission for several years, unfolding in a series of interim decisions. In the case of Pacific Bell, the complex proceeding is providing the commission with its first close look at the local phone company since the breakup of the old Bell system in 1984. It is the major operating subsidiary of Pacific Telesis, a holding company formed at that time to take over American Telephone & Telegraph's local operations in California and Nevada.
Concern Over Subsidiaries
The complexity stems, in part, from the fact that Pacific Telesis has a number of other subsidiaries in unregulated fields ranging from real estate and finance to cellular telephones and computer sales.
The question of how closely the revenue from these unregulated subsidiaries should be monitored to ensure that Pacific Bell customers are not subsidizing them provoked the first public split in philosophy among the four PUC members appointed by Gov. George Deukmejian and the surviving appointee of former Gov. Edmund G. Brown Jr., Donald Vial. (Vial's six-year term has one year to run.)
Vial was voted down 4 to 1 in his attempt to have the commission begin immediate hearings on the subsidy issue. The commission agreed instead to accept a proposal by Commissioner G. Mitchell Wilk to hold off for 18 months, which Vial predicted could make it impossible to unravel Pacific Telesis' complex streams of corporate revenue.
"The majority's position effectively sanctions an ominous surrender of PUC regulatory authority," Vial charged.
Wilk's amendment requires, however, that the holding company's unregulated units pay fees to Pacific Bell if they hire the utility's employees or otherwise benefit from the long-term investment of Pacific Bell customers.