Pacific Bell Seeks to Revise, Then Freeze Home Charge
Pacific Bell, which serves 900,000 local telephone customers in Orange County and 9 million throughout California, proposed Tuesday to set its top residential service charge at $12 a month and freeze it there until 1990.
The company’s present monthly charge is $9.25, including a $1 federally imposed “access” charge that will double to $2 on June 1, bringing the total to $10.25.
Among the nation’s 60 largest cities, only Newark, served by New Jersey Bell, enjoys a lower rate--$9.19 monthly--Pacific Bell said. Connection charges also would be frozen, and the price of most toll calls within the company’s service areas would be reduced.
As filed with the Public Utilities Commission, the proposal would create a new residential service level offering 130 local calls of unlimited duration for $10.25 a month with a $12 cap for customers exceeding the quota. About 60% of Pacific Bell’s residential customers make fewer than 130 local calls a month, the company said; another 15% make more than 200.
The proposal substantially revises Pacific Bell’s pricing attitude toward residential rates, which the company maintains have traditionally been kept well below cost--$27 a month--to assure that basic service remains universally affordable as required by federal law.
Yearly Increases
Under the new pricing scheme, residential rates would be excluded from the company’s goal of setting prices high enough to recover costs and generate the profit margin authorized by the PUC, presently 12.25%. For business customers, on the other hand, rates would be moved up yearly toward actual cost until 1995.
Pacific Bell portrayed its proposal as a “price predictability” plan. It recalled that a doubling or tripling of local rates had been repeatedly forecast after the 1984 breakup of the Bell System. That breakup--in which American Telephone & Telegraph lost its local operating units, including Pacific Telephone, which became Pacific Bell--ended a complex system of subsidies from long-distance tolls and other services to hold down the rates charged for basic residential service.
“This proposal should remove that concern,” President Theodore J. Saenger said in a statement Tuesday announcing the filing with the PUC late Monday.
The PUC has scheduled a special hearing May 27 on Pacific Bell’s view of telephone rates through 1995.
The commission, which in January reduced the company’s annual revenue by $121.3 million, is considering how to adjust specific prices to meet that reduced revenue level. What Pacific Bell proposes, in effect, is that it be allowed to shift much of the cost of providing residential service to its prices for a broad spectrum of special services, such as leasing private phone lines.
Case of ‘Who Pays What’
Pacific Bell, which had sought an annual revenue increase of $445.5 million, seeks no additional funds, according to Louis G. Andrego, PUC project engineer for the rate case. “It’s not a case of more money but of who pays what,” Andrego said.
No decision on the new price list or Pacific Bell’s proposed freeze is expected until late this year.
In exchange for the proposed residential rate freeze, Pacific Bell asks the PUC to loosen its regulatory procedures to provide greater flexibility in pricing Pacific Bell’s competitive services--as opposed to the local service it offers as a monopoly within its service areas. It also proposes that if the company earns more than its authorized rate of profit that the excess be shared by Pacific and its customers to provide a continuing incentive.
Pacific Bell has yet to achieve its 12.25% return, but exceeding it under current PUC policy would result in lowered rates.
On the other hand, Pacific would delay submission of its next general rate review to 1990 from 1989 and would surrender the right to request interim rate adjustments to cover increased costs of doing business. The only changes allowed would take the form of credits or surcharges imposed by the PUC or the Federal Communications Commission. Even beyond 1990 and through 1995, the company projects a local residential rate of just $14.
Saenger said the trade-offs represent “new risks to our business,” but added, “We are willing to accept those risks.”
