Utah's Public Service Commission, backed into a corner over its questionable authority to impose a rate decrease before holding a full-blown rate case, came out swinging this week, ordering a refund of telephone rate overcharges.

In an attempt to show some regulatory strength over a utility accused of overcharging ratepayers millions of dollars, the PSC declared broad regulatory authority by saying it can order "interim rate decreases" and require that overcharges since Aug. 1 be refunded through a future rate case.The order deals with US WEST Communications, formerly Mountain Bell, and the fact that its profits have exceeded authorized levels for months, and regulators want some of that money returned to ratepayers.

A rate case has been scheduled for January. Meantime, regulators and US WEST have been haggling over a motion by the state's Committee of Consumer Services to lower phone rates now and make the final adjustments in January's full hearing. Otherwise, the committee contends, US WEST could delay the rate case and walk away with past excess profits.

US WEST said it plans to comply with the order issued Tuesday, but it is still evaluating it.

But in earlier hearings the phone company reportedly argued that the commission doesn't have statutory authority to lower rates in the interim, although state law does allow regulators to raise rates in the interim, and therefore must wait until the full hearing is over before reducing rates.

The utility has also reportedly warned that demanding a refund of past overcharges would be unconstitutional retroactive ratemaking.

US WEST appeared to have regulators on the ropes over their limited and questionable authority, but the PSC's ruling declares that the state can lower rates on an interim basis even if the law doesn't specifically state that.

"We haven't ordered an interim rate decrease. But we intended to say that we are not going to give up or fail to acknowledge that we can order an interim rate decrease," PSC chairman Ted Stewart said.

He explained that the commission can legally deal with "unjust and unreasonable" rates on an interim basis, and US WEST's mounting profits are by definition "unjust and unreasonable."

State regulatory agencies monitoring US WEST's profits claim the utility has overcharged ratepayers up to $30 million in the past year and could afford to cut rates up to $34 million. US WEST is authorized to earn 14.2 percent on stockholders' equity, but it has earned more than 18 percent during the first four months of 1988.

But the PSC order said only excess earnings after Aug. 1 could be subject to refund. Stewart said that by making that warning now, the commission can avoid setting rates retroactively.

Asked if the ruling means US WEST can walk away with alleged overcharges occurring before Aug. 1, division director Ralph Creer said all hope is not lost because negotiations with the phone company are ongoing to settle past overcharges.

The phone company has said it would prefer negotiating a rate reduction but has added that the interim rate decrease issue is another matter that deals with the company's legal rights.