Evening star., 1926-11-30
Service-at-Cost the Issue.

The street railway companies unite
In a proposal for a merger based upon
q somewhat modified service-at-cost
principle, which the Commissioners
have taken under advisement. The
plan now advanced Is that the cor
porations unite their properties and
operations under a single ownership
and management, protected from
harmful competition" within the Dis
trict u Columbia and entitled to earn
q reasonable return upon the fair
value OF the combined or constituent
properties. The rates of fare are to
be based upon a return Of seven and
one-half per cent upon that valuation,
plus cost of additions. In case the rates
should hereafter yield moro than the
seven and one-half per cent yeturn at
that rate during the period Of any one
year. one half Of the excess iSto be used
in reducing the rates. For two years
after consolidation the present rates
remain in force, and il after that
period it should appear that the new
company has earned more or less than
a reasonable return the excess or def
icit will be carried forward and taken
into consideration in determining the
subsequent rates.
This Is ineeffect the sliding scale of
rates against which the Commission
har "a
ground that the almost inevitable tend
ency of the service-at-cOst plan is to
Increase the fare. Consolidation or
merger has been sought by the Com,
missioners in order to equalize the
conditions Of the two companies. now
at such disparity that a rate of fare
regarded as unduly high for one has
been necessary to permit a fair return
for the other. Computations based on
the valuations contended for by the
companies place the prospective rate
of fare even higher than the pres
ent rate, so that there is slight pros
pect of the desired reduction of trans
portation cost to the public in any
plan of consolidation on the service
at-coSt basis.
The great difficulty about this mat
ter is that the scale and standard of
valuations of the Commissioners and
of the companies differ widely. From
the rulings of the Utilities Commission
on the matter of values the companies
have the right of appeal. There is even
now a court proceeding on this point.
which discloses a disparity of roughly
sixty-siX and two-thirds per cent be-
tween the official and the corporal tons
computations. 1t is evident that litiga-
ton under d service-at-coSt system
would be persistent 8nd protracted.
The present proposition of the COM
panies. however. advances the matter
somewhat toward agreement upon the
terms of merger bill that would be
equitable to the companies and to the
public. Such a measure is likely to
he pressed for action at the present
session. though in view of the short
ness of time availa BILE it may not reach
enactment this Winter. Eventually
merger must be effected. The present
conditions are unsound and unsatis-
factory. Compulsory consolidation IS
not desirable save upon terms that are
sound and fair to all. The issue at
present is with reference to the serv-
'lce-at-cost feature. Some adjustment
that will guarantee the public against
future burdensome rate advances
should be possible and will doubtless
be sought by both sides, as it IS
mutually desirable to reach a work
ing basis for this long delayed and
greatly needed solution of the local
traction problem.