The state Public Service Commission has approved a proposal by the Chesapeake & Potomac Telephone Co. of Maryland to freeze basic telephone rates for the next two years.
In exchange, the utility will be allowed to continue to set prices for competitive services without PSC regulation and to keep all the profit.
The proposal, which was approved yesterday with the backing of the PSC staff and the People's Counsel, also provides that C&P will share profits in the form of rebates to customers if net income reaches a certain level.
The People's Counsel represents consumers in matters before the PSC.
The new arrangement, which takes effect Monday, replaces a similar order that had frozen basic rates since July 1, 1988.
"It is another step forward and allows us to move with the changing competitive environment in which we operate," C&P said in a prepared statement. "This will allow us to help finance the construction of our new telecommunications network so vital to the economic development of the state."
Calling the PSC decision "well reasoned," People's Counsel John M. Glynn said he was pleased to see that the commission would continue to closely monitor the earnings of C&P.
The C&P proposal was opposed by several companies, including U.S. Sprint Communications Co. Limited Partnership, AT&T Communications of Maryland, MCI Telecommunications Corp., Metropolitan Fiber Systems and the Baltimore Sun Co., the publisher of The Sun and The Evening Sun.
The PSC rejected most of the arguments, saying many of the companies ignored the decision reached in the previous case establishing the past rate freeze. "In particular, some interveners choose to reargue issues which were decided in Case No. 8106 [the previous case] in regard to the legitimacy of flexible regulation for competitive services and market pricing," the PSC wrote in its decision.
However, the PSC did agree to examine in spring 1992 C&P's rate of return.
Under the proposal approved yesterday, area consumers won't see an increase in the current basic monthly rate of $16.15 until at least 1992. Rates that are frozen include residential and business dial tone, 911, verification and interrupt and repairs.
Competitive services that will not be regulated include speed dialing, 800 services and custom calling services for multi-line business customers.
There is no limit on what C&P can earn on the unregulated portion of its business. But earnings on the regulated services that fall within the range of 13.6 to 15.6 percent return on equity will be shared with customers, who will get 50 percent of the amount in the form of discounts.