PUC Panel Urges Phone Firm Take $500-Million Cut

The staff of the California Public Utilities Commission recommended Monday that the commission reduce General Telephone’s revenue by at least $500 million in 1988.

The company requested a $114-million cut in its revenue last January in response to a PUC order, but the commission’s Public Staff Division determined that the cut should be “substantially” larger after a six-month investigation of General Telephone’s operations and service, said Martin O’Donnell, Public Staff Division project manager.

The proposed $500-million cut would reduce rates an average of about 30% in 1988, O’Donnell said.

The staff’s preliminary report found that General Telephone failed to show productivity gains and efficiency improvements that should have resulted from the installation of digital switches and other equipment since the company began a modernization program in 1980.

“The staff is highly critical of the poor productivity that General has right now,” O’Donnell said. “Compared to other utilities, it’s at the lower end of the spectrum, and it shouldn’t be.

“They should be able to recognize efficiencies that are inherent in a large company in a monopoly situation,” he said.

Company ‘Disappointed’

General Telephone is “disappointed” by the PUC staff report, said company spokesman Tom Leweck.

“We just don’t think the recommendations are consistent with the requirements of providing our customers with high-quality communications services,” Leweck said. “During the months ahead, we will present evidence that will prove the reasonableness of our request.”

General Telephone has made productivity improvements that allowed the company to eliminate 2,000 jobs in the last three years and 1,600 more by Jan. 1, 1988, he said. No layoffs were involved, he said.

A consumer group that had derided the requested $114-million cut as “absolutely outrageous” said, however, that the actual revenue reduction “should be a lot more” than the recommended $500 million, said Sylvia Siegel, executive director of Toward Utility Rate Normalization in San Francisco.

“I think we have a lot to see from that company, both in rate reduction and service,” Siegel said.

The proposed $500-million reduction could increase by the time the staff releases its final report in May, O’Donnell said. Other reports later this month and in May will recommend how the rate reduction could be spread over General Telephone’s various services.

Hearings Begin April 13

Hearings on the subject are to begin Monday, and the public will be allowed to testify on the issue in June. The commission, which is not expected to rule on the rate case until late in the year, often sets a utility’s rates higher than the staff recommends but lower than the utility requests.

In a separate report, the Public Staff Division recommended an immediate revenue reduction of $53.5 million because of General Telephone’s lower cost of capital for 1987--a result of lower interest rates, O’Donnell said.

General Telephone serves 2.5 million customers in 330 communities, primarily in Southern California. The company reported revenue of $2.8 billion in 1986, Leweck said.