The District of Columbia Public Service Commission lowered rates for local telephone service yesterday, knocking as much as 95 cents a month off residential bills.

But the commission gave Chesapeake & Potomac Telephone Co. permission to gain between $25 million and $30 million annually by raising prices on telephone equipment sold in competition with suppliers of similar goods.

The commission also dumped C&P's controversial proposal to consider the time, geographical distance and frequency of local calls in computing some local phone bills. The so-called local measured service system would have been optional for C&P customers. But the commission said the system could have led to higher local rates and that, in any case, there was little public support for the proposed billing system.

In effect, the commission did away yesterday with a temporary, across-the-board, 19.6 percent relief in rates granted to C&P on April 13. The stop-gap measure allowed C&P to increase returns immediately while the PSC deliberated who was to bear the burden of those increases. The temporary flat rate, intended to yield $40.3 million annually in additional revenues for C&P, would have tapped residential customers for most of the raise.

Under yesterday's ruling, the company still has the right to the extra $40.3 million a year. But the bulk of the raise has been shifted from residential customers--a captive group in terms of its dependence on basic phone service--to C&P's competitive ventures.

"It's a good ruling, a very favorable ruling for consumers," said Brian Lederer, the District of Columbia people's counsel, which initially opposed any new telephone rate increase for C&P. "The ruling places the burden for the increase where it should be, on the company's competitive activities."

C&P spokesman Webster Chamberlin said the company "is disappointed" that the commission turned down the local measured service proposal. But he said the company probably will reintroduce the proposal "at some time in the future."

The commission's actions yesterday in the C&P case included:

An 8 percent "increase" in residential and business local exchange rates. The qualifier is needed because the increase actually is a decrease.

For example, the flat local exchange rate for residential customers had been $8.18 monthly. The temporary, across-the-board 19.6 percent increase last April added $1.60 to that basic residential rate. The revised increase of 8 percent only adds about 65 cents, a 95-cent reduction from the temporary hike.

* An increase of $1.718 million a year for C&P's Centrex services. The increase primarily affects the D.C. and federal governments, C&P's two largest users of Centrex, an automated, office-phone switching system.

* An increase from 6 to 10 in the number of free directory assistance calls a customer may place every month.

* Elimination of free directory assistance calls for businesses, and an increase to 24 cents from 10 cents a call for businesses using directory assistance. That figure goes up to 48 cents when the operator is asked to dial a number.

* A total $138,000 price hike for telephone answering services.

* A $491,000-a-year raise in charges for tandem switching services related to Centrex operations.

* A $1.682 million annual increase in charges for customers using private lines; for example, intraoffice lines not tied in to the public telephone network.

A 2-cent-a-month rate hike for so-called economy service, the basic-black-phone category. The current rate is $2.18 a month.

* A reduction to 4.9 cents a call from 6 cents charged to customers paying measured rates.

* A denial of a C&P request to raise local pay phone rates from 15 to 25 cents a call.