Evening star., 1925-04-29
EIGHT PCT. RETURN
HELDDUE TO c. &P.
Bankers, at Rate Hearing,
Say Loans Otherwise
Would Be Difficult.

The Chesapeake and Potomac
Telephone Co. should be permitted TO
earn lat least" per cent on its
fair valuation, the Public Utilities
Commission was informed today by
three local bankers called by the
company as financial experts TO
testify for it at the opening this
morning of the hearing on the
advisability of reducing telephone
rates.
The witnesses were Eugene f.
Thompson. investment banker; Robert
V. Fleming. vice president OF the
Riggs National Bank, and John Poole,
president of the Federal-American
National Bank. In response TO Ques-
tioning by Attorneys Dozier De Vane
and Alexander Britton, for the teie-
phone company, all expressed the
opinion that investors would hesltate
10 lend money to a BUSINESS COM
parable to that of the telephone COM
-pany if it were not permitted TO earn,
not only a net minimum return OF
per cent but in addition. to set up
an adequate surplus and depreciation
reserve fund.
Distinction Is Drawn.
The witnesses. in explaining cur
rent rates of interest and returns on
money in the District, frequently We're
interrupted by Engineer Commissioners
Bell and Mai. w. e. r. Covell or the
commission and by William Mex.
Clayton, representing the Federation
of Citizens Associations. Both Col.
Bell and Mr.. Clayton sought to dill
ferentiate between the financial status
of a corporation which has a monopoly
in it's line of business and a firm haV-
Ing competitors, indicating that the
former should be in a position 10 func-
tion with a greater degree OF pros
perity than one compelled TO meet
competition.
Attorney Britton brought a laugh
from the participants, including the
Commissioners, when he inquired II
competition was any worse than con-
=trol by a commission"
Issue Is Explained.
At the outset of the hearing, coun-
sci for the company advised their
witnesses that the question of fair
valuation was not being considered at
this hearing, the commission already
having fixed S1S,500. 900 as the fair
/, valuation on the property used and
useful" The whole purpose OF the
determine on the face Of this valua-
ton the fair rate of return that
should be allowed the company.
Mr.. Thompson declared that IL a
public utility earned less than s per
, cent it would be exceedingly difficult
for an investment banker to finance
it. At this point Mr.. Clayton sought
to show that the telephone company
was in a very prosperous state, being
& associated with the American Tele-
phone and Telegraph Co and having
available great financial backing.
Comparison Is Drawn.
Col. Bell asked Mr.. Thompson TO
compare the relative risks TO investors
involved in the purchase OF telephone
stock and stock of firms having com
petition, such as street railways COM
panies, Mr.. Thompson replied that
the telephone stock would be looked
on with more favor than the street
railways stock. s, =.
Replying to querygaey Maj Covell,
Mr.. Thompson expf essed the opinion
that the credit of the local telephone
company would not be injured locally
were it to separate itself from the
parent concern. Mr.. Fleming and Mr..
Poole testified much along the same
line, corroborating MFR. Thompson's s
statements regarding what bankers
considered fair return for a going
concern such as the telephone COM
pany.
Z The hearing. which began at 1890
o'clock. adjourned at noon, with an
agreement TO convene again this
afternoon.