Evening star., 1924-03-03

the law the company would be forced
to appeal from it.
In opening the hearing Chairman Bell
explained that the local commission en-
poets eventually to follow the principle
to be laid down by the Interstate Com
merce Commission for handling depre-
citation. but that in the meantime I'VE
must use some approximation In arriv-
ing at a fair rate and some method Of
applying depreciation to fair value. We
wish to discuss merely whether YOU pre-
fer the straight-line method or the sink
ng-fund method and to hear any argu-
ment AS to how those depreciation de-
ductions should be applied to fair value"
Dozier A. De Vane, attorney for the
telephone company. explained that
at the former hearing on deprecia-
tion. in 1921, his company was not
included, and wanted to know If they
were to take part in this inquiry.
Chairman Bell replied:
"Since we have to determine a value
for your company and a fixed rate.
we are obliged to consider anything
that pertains to that valuation. The
Interstate Commerce Commission set
up methods Of depreciation for your
company. but we must determine the
effect of that depreciation upon your
fair valuation
Hamilton Opposes Plan.
On behalf of the Capital Traction
Company, George Il. Hamilton, presi-
dent. read a prepared statement ex-
planning that with minor modifica-
tions the tentative rules Of deprecia
ton prepared by the commission in
1921 were satisfactory to the company
and have since been followed. with
the minor variations cited by the
company two years ago.
Referring to the direct question Of
deducting the amount in the depre-
citation reserve from fair value the
this company would
respectfully point out that it now
the sinking fund method as Is pro-
vided in the tentative regulations re-
ferred to previously under this meth
cd interest accruals on money In the
depreciation fund accrued to the re-
serve and are not available for the
use of the stockholders for any pur-
pose, but have the direct effect of re-
ducing the annual depreciation allot-
ment charged to the public through
operating expense.
"The total amount of thi Scompany's s
reserve is either invested in interest
bearing securities or is loaned to the
company for capital expenditures.
On such loans interest Is paid by the
owners Of the company into the fund
out of the amount allowed out OF the
return on fair value. In other words
this interest is treated exactly the
same as interest or any other funded
or unfunded debt. Under these con-
ditions the deduction of the depreeia-
be manifestly unfair to owners of the
When Mr.. Ham took the stand for
the Washington Railway and Electric
Company he told the commission that
the Capital Traction Company was
mission to use the sinking fund
method. He declared that his COM
pany was following the straight line
method by directions in an order from
the commission.
Hearing to BE Resumed.
Secretary Allen Interrupted to eX-
plain that when the valuations were
completed the commission made a
tentative arrangement to nave each
company follow the method II had
been using until definite rules were
set.
Mr.. Ham explained that his purpose
in raising this point was to avoid any
conclusion that the depreciation re-
serve of his company should be now
deducted from fair value because
the straisht-line method of setting
up depreciation had been used. He
said that his claim also would be that
no deduction should be made from
fair value for accrued depreciation.
The commission adjourned at noon
until 2 o'clock. The Washington
Georgetown Gas Light Company is taxi
Ing part In the hearing in addition to
the street railway. electric light and
telephone companies.
The hearing Is regarded as an i'm
portant one for the public utilities,
since 1t involves the possible deduc-
tion from valuation upon which rates
for consumers are based,