C&P advised to tighten up its business Audit tells PSC to keep an eye on phone firm's corporate books

June 23, 1992|By Leslie Cauley | Leslie Cauley,Staff Writer

Chesapeake & Potomac Telephone Co. could save itself -- and consumers -- millions of dollars by tightening up its business, according to a new report for the Public Service Commission.

And regulators should keep a close eye on C&P's corporate books to make sure charges for related businesses -- which today number in the dozens -- aren't being unfairly passed along to Maryland consumers, the report says.

Those conclusions are contained in a lengthy report on C&P and the regulated and unregulated businesses of its corporate parent, Bell Atlantic Corp., in which C&P has an interest. Those companies include Bellcore, the research arm of the seven Bell phone companies, as well as businesses that trade in everything from real estate to automobiles.

According to the report's tally, Bell Atlantic and its C&P subsidiary could save at least $16.3 million if its recommendations are adopted. The report lists 52 ways C&P might tighten up its business to save money.

Some of those projected savings were immediately questioned by William Williamson, manager of regulatory and financial accounting for C&P. Mr. Williamson said some of those savings had been "pulled out of the air" by auditors.

"They are not based in reality," Mr. Williamson said.

People's Counsel John Glynn, who represents the interests of ratepayers before the commission, agreed that the auditors must prove their claims.

"The report has raised a lot of interesting questions and issues. But whether these numbers can be backed up to persuade regulators to disallow some [of C&P's] expenses remains to be seen," Mr. Glynn said.

The report, which cost $1 million and took an independent auditing firm more than a year to complete, doesn't reveal evidence of "cross-subsidization" -- the industry term for passing on costs for unregulated businesses to consumers.

But the report, by the Liberty Consulting Group of Baltimore, did single out a number of potential trouble spots.

That includes C&P's relationship with some affiliates, including Bell Atlantic Network Services Inc., which provides C&P with such things as supplies, advertising and marketing services. NSI's charges to C&P in 1990 were $253 million, more than a quarter of C&P's total operating expenses, the report said.

To ensure "accurate charges" to C&P, the report suggested tightening up the methods under which it buys services from Network Services and auditing those methods regularly.

The report also took aim at some of Bell Atlantic's real estate leasing practices. The report singled out two leases -- between Bell Atlantic and a subsidiary -- for a "complete and independent" analysis to ensure that the company was charging a fair price for the property.

Bell Atlantic stood to save $700,000 a year in lease payments on one property alone, the report claimed. That property, in Arlington, Va., has since been sold, according to C&P.

And the report criticized a $500,000-a-year expenditure by Bell Atlantic to finance a corporate fleet of four jets and a helicopter to transport officials, including C&P President Frederick D'Alessio.

According to C&P, the fleet is being pared down.

The $1 million cost of the report will ultimately be passed along to ratepayers.

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