Ruling May Save Consumers Millions in Monthly Phone Bills : Decision Limits FCC’s Authority on Setting Rates

In a ruling that could save consumers millions of dollars in monthly telephone bills, the Supreme Court today gave states more freedom from federal regulations in setting rates.

By a 5-2 vote, the court barred the Federal Communications Commission from imposing on the states an equipment depreciation formula aimed at promoting more rapid modernization.

“We conclude that (federal law) represents a bar to federal preemption of state regulation over depreciation of dual jurisdiction property for intrastate rate-making purposes,” Justice William J. Brennan wrote for the court.

Dual jurisdiction property refers to equipment used by phone companies for both in-state and out-of-state service.

Savings on Rates

The decision is expected to affect most phone companies in the nation, saving phone users potentially millions of dollars in higher rates.

The court rejected the arguments of 26 phone companies including AT&T;, supported by the Reagan Administration, that the FCC’s depreciation formula should apply industrywide.

Today’s decision struck down a 1984 ruling by the U.S. 4th Circuit Court of Appeals in Richmond, Va., which upheld the FCC’s authority.

The Supreme Court ruling does not bar the FCC from enforcing its depreciation formula for equipment used by phone companies solely for interstate service.

Incentive to Modernize

The formula is intended to promote modernization by giving phone companies financial incentive to develop and install new equipment, Administration lawyers said. In effect, phone companies would be able to recover their investments more quickly through rate hikes.

Higher rates caused by the FCC’s depreciation formula already have taken effect in some states, while the increases have been suspended by court orders in others.

For example, in Louisiana--a leading challenger to the FCC formula--state regulators were ordered in 1983 to grant a $40.5-million rate increase to South Central Bell Telephone Co.

The Louisiana Public Service Commission sought to limit the company’s rate increase to $12.7 million.

States Urged Limit

Most states, including California, joined Louisiana in urging the Supreme Court to limit the FCC’s authority.

Attorneys for the California Public Utilities Commission said the ruling could spare the state’s telephone users an estimated $50 million in rate hikes. “This is a real victory for the states and for consumers,” said Janice Kerr, general counsel for the PUC in San Francisco.

In other action, the court:

--Rejected appeals by public utility companies seeking to recover from consumers the costs of nuclear power plants never completed or shut down after completion.

The court, for varying reasons, let stand rulings against the operators of the Three Mile Island plant in Harrisburg, Pa., and the never-completed Bailly plant near Chesterton, Ind.

--Agreed to examine what power states have to limit prison inmates from marrying and from corresponding with inmates in other prisons. The court said it will hear an appeal by Missouri officials seeking to limit inmate marriages and letter-writing.