The Maryland Public Service Commission yesterday rejected a proposal by Bell Atlantic-Maryland Inc. to start charging a late-payment fee to residential customers because agreement could not be reached on an appropriate cut in other telephone charges to offset the $7 million a year the new fee would raise.
But the PSC, the state agency that regulates utilities, urged the company to work with its opponents to reach a compromise and file again.
"We're concerned about the targeting of the offset," said PSC Chairman H. Russell Frisby, adding that the commission supported the other half of the proposal of charging a 1.5 percent monthly charge for late payments.
Unlike other utilities that have long charged late fees, Bell Atlantic has spread the cost of tardy payments over its entire customer base. But now that Bell Atlantic is facing increased competition, it is trying to match its costs with the customers causing them.
"We're trying to get our cost-causers to pay," said Robert L. Terry, manager of regulatory relations for Bell Atlantic. "We're trying to get our costs where they belong."
The company implemented a late-payment charge for businesses in August, with the offsetting reduction in long distance calls charged by Bell Atlantic.
During the course of a year, about $713 million worth of payments are late from residential customers, or about a third of the bills outstanding any particularly month, Mr. Terry said. This has not changed appreciably over the last few years, he said.
Yesterday's deadlock developed over how to maintain "revenue neutrality."
Under agreements that date back to the late 1980s, the telephone company agreed that if a basic telephone fee is raised, another charge is cut to reduce revenues by an equal amount.
This revenue neutrality is in exchange for giving Bell Atlantic more flexibility in pricing services that are considered "competitive," such as speed dialing and in-house wiring.
In return for the late fee, Bell Atlantic proposed offering discounts of 10 percent to 30 percent to customers who use two or more of its Custom Calling services, such as Call Waiting and Caller ID.
But the staff of the PSC and the Office of the People's Counsel, which represents consumers before the board, wanted Bell Atlantic to cut its processing charge for new telephone service from $22 to $8. This would help low-income customers -- who are often the late payers -- and promote the installation of telephones in all homes.
"It should encourage [telephone] subscribership," said Ann A. Dean, a regulatory economist for the PSC staff.
While 95.5 percent of all Maryland households have telephones, some areas lag behind, such as Baltimore City, where 92.2 percent of households have phones, and Dorchester County, where 90.4 percent of homes have telephones, Ms. Dean said.
But Bell Atlantic countered that the processing charge is already below its costs and lowering it more would be counter to its efforts to match charges with costs.
"It is logically inconsistent," David K. Hall, vice president and general counsel, told the five-member commission.
He also said Bell Atlantic's proposal would benefit 56 percent of its customers, who have two or more Custom Calling services, compared to about a quarter of the customer base who sign up for new service during a year.
Mr. Hall raised similar objections to suggestions that the basic service fee be reduced and said the company would withdraw the proposed late-payment fee before accepting cuts in those fees.
While the commission supported the late fee, it was uncomfortable about giving the corresponding benefit to more affluent customers who would probably not be affected by a late-payment charges.
"I would encourage the company to refile," Mr. Frisby said.