The Maryland Public Service Commission ordered the Chesapeake & Potomac Telephone Co. yesterday to explain why its earnings in 1978 exceeded the rate permitted by state law.
The commission found that twice in 1978 the telephone company's earnings on its investments exceeded the 9.25 percent rate of return authorized by state law.
If the commission detemines that the earnings exceeded authorized state guidelines the telephone compay could be ordered to lower rates charged its 1.5 million customers.
The show cause order issued yesterday was based on an auditor's report citing the telephone company's 9.49 per cent earnings for a 12-month period ending in October.
The amount of the excess in dollars and cents was not immediately available.
But the commission's auditors subsequently found another increase in earnings to 9.58 percent for a 12-month period ending last Nevember. That excess equals about $7.5 million on $113,560,000 in adjusted interstate income for the same period, the commission said.
The auditor's review "may indicate the company's rates are no longer reasonable," said Ronald E. Hawkins, the commission's executive secretary.
A phone company spokesman said, "The real issue, we feel, is that our current earnings are completely inadequate in light of what has happened in the economy. Prices or earnings levels set almost two years ago are both out of date and inadequate today. He said the compnay will make a formal reply to the commission within 20 days.