A state Public Utilities Commission judge on Tuesday recommended that Pacific Bell be fined $65 million for repeatedly charging its customers improper late fees.
If upheld by the full commission, the fine would be the largest ever levied against the phone company, consumer advocates said.
The proposed punishment stems from allegations that Pacific Bell, the monopoly local phone company throughout much of the state, routinely assessed customers late payment charges because of delays in the company's own bill processing operations. According to the judge's opinion, consumers were assessed more than 7 million improper charges between 1986 and early 1991, requiring $32.1 million in direct customer repayments. Further, citing the seriousness of the allegations, the judge recommended punitive damages of $33 million.
"Pacific's policies and practices represent a continuing pattern of abuse and mismanagement which benefited Pacific's shareholders at the expense of its captive customers," wrote PUC Administrative Law Judge Kim Malcom. "Pacific could engage in these systematic violations only because of its position as a monopoly provider of an essential public service."
For the Record
Los Angeles Times Friday April 16, 1993 Home Edition Business Part D Page 2 Column 6 Financial Desk 2 inches; 64 words Type of Material: Correction
TURN--Toward Utility Rate Normalization was not surprised by a California Public Utilities Commission judge's recommendation that Pacific Bell be required to pay $32 million in refunds and $33 million in fines for repeatedly charging customers improper late fees. In fact, the consumer group said it had called on the PUC to impose an even larger fine. The group's reaction to the judge's recommendation was incorrectly characterized in a story April 7.
In a heated rebuttal, Pacific Bell Regulatory Vice President Mary Vanderpan said the company was "absolutely shocked by the apparent disregard of the facts presented" by the company. "In our opinion," she continued, "the proposed decision draws erroneous conclusions and does not reflect the evidence presented."
The earliest the full commission could rule on the proposed decision would be May 7.
The suit stems from charges first levied in early 1991 that Pacific Bell was levying late payment fees on customers who had paid their phone bills on time. However, because the payments had been made in plain, non-company envelopes, their processing had been delayed and the customers were assessed late charges of 1.5% of outstanding balances over $20.
Pacific Bell said it corrected the problem in early 1991 immediately after learning of it. Further, Vanderpan said the company has refunded $5 million of the $6 million in late charges that the company believes were erroneously collected.
However, the PUC judge noted that the problems uncovered in 1991 represented the second time in five years that the phone company had "engaged in comparable abuses."
Toward Utility Rate Normalization, a San Francisco consumer group known as TURN, filed the complaint against Pacific Bell in March, 1991. Later that year, they recommended that the phone company be required to refund $20 million.
The size of Malcom's recommended award, they said, was surprising.
"It's unprecedented for a fine of this size," said Thomas Long, a staff attorney for TURN. "We are not aware of any larger fine."
Michael Shames, director of another utility consumer advocate group in San Diego, added: "This isn't a victory yet, but it is a vindication of the consumers' point of view. It sends a stinging message to utilities from state regulators that they shouldn't rip off consumers."