Coalition Pushes PUC to Cut PacBell Rates by $2 Billion

A group of consumer activists and businesses have joined forces to ask state utility regulators to shave as much as $2 billion from Pacific Bell rates over the next three years.

The coalition, the California Alliance for Ratepayer Equity, includes long-distance carriers Sprint and MCI; Los Angeles County; the City of San Diego, and the consumer group Toward Utility Rate Normalization.

The coalition said Monday that it wants the state Public Utilities Commission to change how the state’s largest phone company is allowed to calculate its profit and rates.

The group said GTE, the state’s second-largest phone company, has already accepted a similar proposal that will lower rates to its customers by about $53 million, or about 4%, over the next three years.

Pacific Bell, however, said it will fight the new coalition’s efforts when hearings on the matter begin late next month. A company executive said the cuts sought by the coalition would result in a 10% rate reduction at a time when the company needs as much revenue as it can generate to upgrade its network and services.

Representatives of the new coalition argue that Pacific Bell’s rates and allowed profit margins should be lowered to reflect both declining interest rates and the ever-dropping costs of providing highly automated phone service.

Under the current profit formula, scheduled to expire at the end of the year, Pacific Bell is allowed an 11.5% to 13.5% profit level and is required to cut its costs of providing phone service 4.5% each year.

However, the coalition said that in today’s low interest rate environment, the profit level should be pegged instead at 9.75%. It further argues that service costs should be cut 6.5% each year.

Repeated talks between the coalition and Pacific Bell failed to produce a compromise.