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Telephone rates will increase by at least 4 percent, while customers of Niagara Mohawk Power Corp. will pay a "temporary" rate increase of up to 6.9 percent in action taken Wednesday by the state Public Service Commission.

In approving a $250 million rate hike for New York Telephone, the commission said it also will investigate whether the utility wasted money in purchasing products from a related firm.

It ignored a recommendation by three administrative law judges to allow a rate hike of just $23.6 million. The phone company originally requested $964 million and last year commission staff had recommended allowing $445 million.

The commission staff said it could not give details on the rate increase because costs will vary widely depending upon the type of service. Together, these services will cost 4 to 5 percent more.

The staff of state Attorney General Robert Abrams said a typical monthly bill of $33 will increase by $1.55, or 4.7 percent.

Niagara Mohawk, meanwhile, received approval for a 6.9 percent increase in electric rates and a 4.9
percent boost in gas prices until July 1, when the commission will consider new long-term rates for the company.

The "temporary" rates could be the same as those adopted next year, officials said. A typical residential customer will pay $3.20 more per month for electricity, while average gas bills will increase by $6.75 per month.

These are the first increases in the company's base electric rates since 1987; since 1985 for gas.

Abrams said he was generally pleased with the commission's action on the telephone rates.

But Richard Kessel, executive director of the state Consumer Protection Board, threatened some unspecified legal action against the Wednesday decision.

"I am astonished that the PSC would ignore the recommended decision of its own administrative law judges and grant the telephone company a windfall rate increase for next year," Kessel said. "The record in this case clearly indicates that (New York Telephone) is not entitled to any rate relief and, in fact, should have its rates reduced. To do otherwise is blatantly unfair to NYTEL ratepayers."

Abrams said he is disappointed the commission did not order the company to use the rate increase to modernize its phone network. Still, Abrams said he was happy with the decision to investigate purchases by New York Telephone of equipment from companies that are related to New York Telephone but which are not regulated.

One affiliate, Material Enterprises Co., added spice to the otherwise dry and technical rate proceedings before the commission.

Material Enterprises, according to testimony, played host to New York Telephone employees during parties in Florida that featured sex games.

Testimony indicated that New York Telephone wasted money on this and other affiliates, and that money should be returned to ratepayers, Abrams said.

Kessel asked how the commission could grant a rate increase and at the same time order an investigation of issues involving Material Enterprises.

Kessel also has been critical of the Niagara Mohawk plan. He claims this temporary increase simply shows that the utility is not controlling its costs.

Niagara Mohawk officials dispute that charge. They say they are meeting their promise to conduct a study of their operations to improve efficiency.

Some temporary rate increase was expected since last year when the state offered to give Niagara Mohawk more permanent rates sometime this year. But the state delayed that action because of a variety of financial questions and issues involving Niagara Mohawk.

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