Pacific Bell’s residential telephone customers would win an average reduction of 90 cents in their monthly bills starting in January under a compromise proposal worked out Friday by the company and the staff of the state Public Utilities Commission.
That represents a 3.3% cut in the average local phone bill of $30. Both sides had agreed that the company’s cost of doing business has declined over the last two years, but disagreed on how much.
The proposed reduction will be considered by the five-member commission, which is expected to act before the end of the year, said Terry Mowrey, a PUC staff supervisor.
For Pacific Bell, the compromise would reduce annual revenue by $233 million. The proposal would lower the maximum annual profit the phone company could earn to 13% of shareholders’ investment in Pacific Bell’s parent, Pacific Telesis Group. Pacific Bell had proposed a 14% rate, down from 15%.
“We feel that it’s a fair and appropriate compromise agreement,” said Charlene Baldwin of Pacific Bell.
The rate adjustment is part of an overhaul of Pacific Bell’s prices that has taken place over several years. Still to be decided is the PUC staff’s separate recommendation, made last August, that Pacific Bell rates be slashed by $700 million, or 10%, because of construction spending the staff called wasteful. Pacific Bell disputes that opinion, but hearings on the issue are likely to last well into next year.
Separately, Pacific Bell acknowledged that about 3 million of its customers were overcharged an average of more than $2 for federal, state and local taxes on local phone bills it issued from Oct. 1 to Oct. 8, when the error was detected. The refund will appear as a credit on the November bill, Baldwin said.