Small Rate Cut Ordered for Pacific Bell

Pacific Bell, which had sought $492 million in interim rate increases, was instead ordered by the California Public Utilities Commission Wednesday to lower its rates by $18.5 million.

The action left the company, which provides local telephone service to 7.2 million residential customers and 1 million businesses in California, “totally dismayed,” spokesman Reed Waters said.

The PUC agreed, however, to raise the rates charged by Santa Monica-based General Telephone Co. of California by $77 million. That increase could become effective as early as next week. General Telephone had sought $106 million, spokesman Tom Leweck noted.

The PUC was acting Wednesday on requests for mid-course corrections in telephone rates, which the commission permits in years between major rate cases, which occur every three years. The PUC said it limited itself Wednesday to rate adjustments linked to changes in the companies’ cost of doing business since their last formal rate increases.

“We thought we had a very solid case for the $106 million,” General Telephone’s Leweck said. Nearly two-thirds of the increase awarded was to enable the company to speed conversion of its switching equipment to digital operation capable of handling both voice and data transmissions.

General Telephone’s 2.5 million customers, mostly in Southern California, will pay the higher rates through an across-the-board 4.83% surcharge added to their monthly bills. That will add about 47 cents to the average residential phone bill, Leweck said.

As for Pacific Bell, the modest 0.31% reduction will “be hard to find” on customers’ bills, Waters acknowledged.

Much of the $492.3 million sought by Pacific Bell, the principal subsidiary of San Francisco-based Pacific Telesis Group (formerly Pacific Telephone & Telegraph Co.) will be reconsidered during PUC hearings in April on the company’s proposed 1986 rate increase. Pacific Bell originally asked for $1.36 billion more from its customers when it filed the rate case last year, but the company Tuesday slashed that sum by one-third, to about $950 million, citing reduced debt costs, among other factors. Waters said the PUC action Wednesday will not cause a further revision.

Productivity Changes

Although the commission said it was only weighing the companies’ costs of doing business in reviewing rates, it did take into account recent productivity changes brought about by new equipment.

Pacific Bell had estimated its productivity gain at less than 3%. However, the commission ruled that the company’s modernization program should reduce its labor costs and improve productivity by 5%--the same standard it set for General Telephone.

“It is time for rate-payers to share” in the benefits of the modernization effort in part financed by them, Commissioner Victor Calvo said.

Waters called the 5% productivity increase virtually impossible for the company to realize unless, he said, the commission provided “some magic fairy dust” and “words of wisdom” in its order.

“I just don’t know how we’re going to accomplish that,” Waters said.

Pacific, he claimed, “historically far exceeds” General Telephone in productivity and “leads the industry” in efficiency in furnishing comparable services.

‘Merited Decision’

Consumer advocate Sylvia Siegel, executive director of TURN (an acronym for Toward Utility Rate Normalization) hailed the $18.5-million rate reduction as “a merited decision.”

“We think they got too much in 1984,” when Pacific Telephone won a $595-million hike, Siegel said.

She said, however, that she was “a little upset” by the $77-million increase that the commission awarded to General Telephone, citing continuing service complaints from the company’s customers. General Telephone’s last major rate hike was a temporary increase of $150 million granted in 1983.

In a third telecommunications rate issue, the commission postponed for two weeks, at the request of Commissioner William T. Bagley, a ruling to cut AT&T; Communications long-distance rates by $8.3 million, or 0.49%. While the other four commissioners seemed agreed on the ruling, Bagley said he needed more time. PUC President Donald Vial agreed that AT&T; Communications represents a thorny regulatory issue. “We don’t know how we’re going to regulate AT&T; in the future,” he said. Since the breakup of the Bell System, the long-distance arm of American Telephone & Telegraph Co. remains “the dominant carrier in a competitive world,” Vial said.