C&P asks PSC to reconsider order to cut its rates

January 30, 1993|By Timothy J. Mullaney | Timothy J. Mullaney,Staff Writer

Chesapeake and Potomac Telephone Co. of Maryland yesterday asked the Public Service Commission to reconsider its order directing C&P to cut its rates by $28.6 million.

The company argued that the PSC ordered it to accept a rate of profit that was too low and that too much of the earnings from its Yellow Pages operation were being included in its profit cap.

"It really takes away any incentive we might have to modernize the network and improve efficiency, David Pacholczyk, a C&P spokesman, said.

The appeal was filed late yesterday with the Public Service Commission, Mr. Pacholczyk said.

The company contended that the commission's order, announced a week ago, would force it to cut its authorized rate of return by more than 15 percent. The commission had estimated that the cut would save the average consumer 39 cents a month on phone service.

The company and the commission have cooperated in recent years in building a regulatory scheme in which the state gives C&P incentives to compete in non-traditional businesses for a phone company. The effort was intended to let the company increase profits while holding down the cost of the company's monopoly telephone service.

The regulatory philosophy is also designed to promote efficiency by letting C&P keep part of the money if the company makes more profit than called for under the PSC-approved rate structure.

C&P contends that last week's order takes away too many of those incentives.

"The commission's decision gives us no incentive to make investmentsbecause it severely limits the earnings we can we might realize by making them," C&P President Frederick D. D'Alessio said. "Why should we improve our system . . . by investing in new technology if we could not realize any of the benefits?"

The state's consumer advocate in utility cases conceded that the order may have given C&P too little incentive to improve its network.

People's Counsel John M. Glynn said the answer might lie in tinkering with the commission's proposal that C&P refund half of the profits it makes above the PSC's profit target for the company.

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