Panel Orders GTE to Cut Telephone Rates by 13.4%

The 2.5 million customers of GTE California on Wednesday won what is apparently the biggest telephone rate cut in state history, a reduction that will trim the average residential bill by about $4 a month to $25.95.

The rate cut, which takes effect Sept. 6 and amounts overall to $218.3 million annually, was ordered by the state’s Public Utilities Commission as a result of the company’s improved productivity and lower operating costs. Both company officials and state regulators said they believe that the decrease, which amounts to 13.45%, is the state’s largest ever.

As a result of the PUC ruling, GTE California’s rates for the first time will fall slightly below those of Pacific Bell, the state’s largest phone company. Pacific Bell’s residential customers pay an average monthly bill of $26.49.

The PUC action was the latest of three rate cuts totaling $379.3 million that have been imposed on GTE California since last September. A proposed further decrease of $27.5 million, based on possible tax savings, remains before the commission.

However, the PUC noted that accounting changes ordered by the Federal Communications Commission will restore more than one-third of Wednesday’s reduction--about $75 million--by the end of the year.

GTE California’s chief executive, David Anderson, said in a prepared statement from the company’s Thousand Oaks headquarters that he was “disappointed” by the size of the cuts. He noted that the company had sought an overall reduction of $114 million when the current rate proceedings began in January, 1987. And that, he added, was the largest reduction ever proposed by a California phone company.

Anderson said some decrease in revenue was justified because of lower taxes and interest rates and “significant gains” in efficiency. But he characterized the PUC’s reduction as “excessive.”

GTE California spokesman Tom Leweck said, however, that it is “premature to speculate” on whether the company will appeal the order. “We haven’t had a chance to read it to see where our differences lie,” he said.

Consumer advocate Sylvia Siegel of TURN, or Toward Utility Rate Normalization, called the PUC action “a good start.”

“But,” she added, “the real hassle will come next year when the commission designs the new rate structure.” This, she said, will determine what types of customers benefit most from the rate cuts.

Wednesday’s PUC ruling was foreshadowed last month by a commission hearing officer’s recommendation for GTE California’s annual revenues to be cut by $216 million. The five-member commission made only minor changes in that recommendation.

Robert B. Morris III, an analyst with Goldman, Sachs & Co., played down the significance of the reduction, saying it was anticipated. The real issue, he said, is what the action means for Pacific Bell, which faces a $700-million cut proposed by the PUC staff.

Moreover, Morris said, Pacific Bell continues to have a 15% authorized profit margin, while GTE’s is now 12.75%. GTE’s fate may offer “a guidepost for what might await Pacific Bell,” he said.

GTE California’s string of reductions this year easily top even giant Pacific Bell’s largest-ever rate cut. That decrease totaled $318.4 million, but it was distributed over two years, 1986 and 1987.

For GTE California, the decreases mark a sharp change since the first half of the 1980s. It was granted a $192.6-million rate increase in June, 1982, another $150-million boost in 1983 and a further $155 million in 1984. These reflected the higher interest rates prevailing then and allowances for an intense construction program to improve service quality, which had been the object of strong consumer complaints in the 1970s.

The latest decrease will save GTE California customers about $1.31 a month on the company’s basic service charge of $9.75, dropping that fixed fee to about $8.44.

Additional savings bringing the cut to an average of $4 a month will depend on each customer’s usage, said GTE California’s Leweck. Local toll rates for calls within the company’s service areas will fall, as will monthly fixed charges for such extra services as “call-forwarding” and “call-waiting.”

Billing adjustments will appear in the form of credits or reductions in “surcharges” each month until next year. The commission will then set new prices for each service offered by both GTE California and Pacific Bell in line with the revenue changes imposed in recent years.

GTE California’s main service areas are along the Southern California coast and inland through much of Riverside and San Bernardino counties. It also serves scattered communities in Central California and the San Francisco Bay Area.