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             California Public Utilities Commission
505 Van Ness Avenue, Room 5301            San Francisco, CA 94102
CONTACT: Armando Rendon           September 20, 1996     CPUC-042
         415-703-1366                                (R95-04-043)

          CPUC DENIES PACIFIC/GTEC COMPENSATION CLAIMS

     The California Public Utilities Commission (CPUC) today
rejected Pacific Bell (Pacific) and GTE California (GTEC)
requests for billions of dollars in rate increases to make up for
the revenues they said would be lost due to local phone
competition in their service areas.
     Calling the companies' projections "highly speculative," the
Commission nevertheless permits the firms to file no earlier than
January 1, 1997, an application to show that competition will
deprive them of the opportunity to earn a fair return on their
regulated assets.
     Pacific sought $3.7 billion over five years, GTEC an
estimated $500 million.  Citizens Utilities Company also joined
in arguing for compensation, but did not project a specific loss
amount.
     The companies had argued that because of the introduction of
competition into local phone markets, their shareholders would be
denied an opportunity to earn a fair return on investment,
amounting to a violation of their claimed  constitutional
protection against uncompensated "takings" of property.
     At the time Pacific and GTEC requested compensation for
what they called "franchise impacts," proceedings dealing with
major components of a revised regulatory program, such as
universal service and equal access rules, had not been completed.
     An insufficient record exists at this time, the Commission
concluded, about the outcomes of these other related proceedings
so it would be premature to determine now whether the new
regulatory program will adversely affect rates of return.  The
companies' testimony, therefore, was found to be too speculative.
     The Commission will allow the companies to submit evidence
that CPUC policy has resulted in investor losses.  Evidence need
only cover regulated assets of the two firms.
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