MONTPELIER, Vt. (AP) – Bills will be going down for customers of a small telephone company, which lost a state Supreme Court appeal about its rates.

Shoreham Telephone customers’ bills are likely to fall about a third under the court’s ruling, which upheld a state regulatory decision that cut the company’s annual revenue on in-state service by $1.2 million.

The average residential customer’s bill will decline about $340 a year.

“We are lowering our local rates and charges for local measured service,” said Jim Arnold, vice president and general manager.

Shoreham Telephone serves 3,247 residential customers in Shoreham, as well as customers in Shoreham, Orwell, Cornwall, Whiting, Panton, Sudbury, Benson, Hubbardton and a small part of northern Castleton. It also has 360 business customers, who stand to reap greater savings.

The company was ordered by the Public Service Board to lower its rates last year after the board considered a proposed sale of the company. The board determined that Shoreham’s profit margin on in-state calls was too high.

The board examines a company’s rate of return when a sale is pending. Shoreham had agreed to be bought by Mid-Maine Communications of Bangor, Maine, but the deal fell through as the rate case dragged on, Arnold said.

The company is privately owned by the Arnold family.

A large part of the Nov. 17 Supreme Court decision was based on the accounting methods used to determine revenue and set rates. Justices found that the rate of return was “well in excess” of industry standards.