The Supreme Court said yesterday it will decide whether the federal government may force states to grant bigger increases in intrastate telephone rates, an issue that could result in millions of dollars in higher phone bills nationwide.
The high court agreed to consolidate two cases on the issue, including one involving a possible $45 million refund to about 1.6 million customers of Chesapeake & Potomac Telephone Co. of Maryland.
Both cases involve state challenges to a 1983 Federal Communications Commission order that state agencies use an FCC formula in calculating part of telephone rates for intrastate service.
In 1983, the FCC ordered state authorities to use a new method of determining the rate of depreciation of telephone equipment. Under the new formula, the telephone companies would receive larger rate increases than under the old method, which is still used by many state agencies. For example, C&P of Maryland used the FCC formula to obtain a rate increase in April 1983 that boosted its annual revenue $16.1 million above the level that would have been justified under the old formula.
C&P raised rates on the condition that it refund the money with interest if the court rules against the increase -- an amount that now would be worth $45 million to $50 million, according to the Maryland Public Service Commission.
The FCC's new depreciation formula is designed to promote modernization of telephone equipment by providing financial incentives, said federal lawyers in arguments submitted to the Supreme Court. They also argue that federal law gives the FCC the authority to preempt the states in determining depreciation calculations. The states contend that the FCC's authority over interstate rates does not preempt the states' powers to determine intrastate rates.
The Virginia Corporation Commission and several other states appealed the FCC's order to the Fourth U.S Court of Appeals, in Richmond, which upheld the FCC's authority in June.
Louisiana's regulatory agency appealed the appellate court's decision to the Supreme Court. California, Ohio and Florida had also petitioned the high court to hear the case. Yesterday, the Supreme Court agreed to hear Louisiana's appeal and to permit the other states to make arguments in the case.
The Reagan administration, together with American Telephone & Telegraph Co. and state and regional phone companies, is urging the Supreme Court to uphold the lower court's decision in favor of the FCC.
Federal lawyers representing the FCC also argued that if the commission's power is to be limited, it should be limited by Congress. Legislation has been introduced that would give states control over telephone depreciation formulas.
The Supreme Court decided to consolidate Louisiana's appeal with the Maryland case, which arose out of the 1983 C&P rate increase.
When the Maryland Public Service Commission refused to use the FCC's formula, C&P obtained a court order forcing the commission to grant the $16.1 million increase in annual revenue.
The commission is appealing the court order, arguing on technical grounds that the U.S. District Court in Maryland lacked the proper jurisdiction.
If either of the Supreme Court's final decisions undermines C&P's position, the company would have to refund at least $32 million -- to cover the $16.1 million over two years -- plus interest, which could push the total to $45 million to $50 million, said Kirk Emge, general counsel for the commission.