The D.C. Public Service Commission decided yesterday not to reexamine its decision to allow Chesapeake & Potomac Telephone Co. to increase its basic telephone rates by $31 million -- about $23 million less than the company had requested.

The commission, however, did award C&P about $500,000 for depreciation expenses. If spread across the board, the increase would add another 2 cents a month to the phone bills of residential customers with unlimited metro-wide service, and 1 cent to the bills of those with D.C.-only service, said Howard Davenport, the PSC general counsel.

C&P had asked the commission last month to grant it an additional $15 million.

"We were disappointed that the commission didn't grant us what we expected," said Web Chamberlin, spokesman for C&P. "We had asked them to consider giving us over $15 million and got only half a million."

The Office of the People's Counsel also had asked the commission to reconsider the C&P rate hike, but that office had sought to have the size of the increase reduced. "I'm disappointed, but not surprised, about the denial of the motion to reconsider," said D.C.People's Counsel Frederick D. Dorsey, who represents consumers before the PSC.

Davenport of the PSC said there was "no evidence presented by any of the parties that the commission had erred" on its decision handed down Aug. 9. "It was a very difficult case on which the PSC had to balance many competing interests," Davenport said.

Yesterday's PSC decision came at one of a series of hearings this week on proposals by C&P for a rate structure to implement the $31 million increase authorized earlier. The PSC said it would grant C&P an additional $499,000 because of a mathematical error in computing depreciation expenses. Rate-structure proposals by the commission and the Office of the People's Counsel also are under review.

The commission must determine which classes of customers will bear what percentage of the rate hike granted to C&P in August. Under C&P's proposed rate structure, most classes of users would be paying higher rates, with some paying more than twice what they do now.

Chamberlin said 60 percent of the expected $27.5 million in new revenue, or $16.7 million, would come from residential customers, the rest from business and government users. That part of the increase would become effective as soon as the PSC approves a plan. The remaining $3.5 million will come from a 1.5 percent across-the-board monthly surcharge on rates for all classes of users in the District except coin phones and Centrex service, Chamberlin said.