Evening star., 1928-12-06

during next 10 years, including deduc-
tionS for property retired and additions
for improvements and betterments,
1t also criticizes lack of proper pro-
vision for depreciation reserves and
funds and shows that annual deprecia-
ton charge for a single street car
originally costing s6,500 might vary,
under different methods that could be
applied, from $126 to $4,000.
In discussing this matter with the
officials of the companies, 1t was stated
that this matter had been left to the
determination of the commission and
that the companies would follow what
ever method the commission adopts.
The agreement, however, affords no pro-
lection, and the matter Is too vitally
important to pass unsettled"
Holds Move Improper.
There Is another significant omis-
sion affecting the depreciation reserves
and amortization. Nothing is said In
the agreement regarding the use of
the proceeds from the sale of property
which is or will be included in the rate
base. In response to questions asked
on this point, it has been stated by
officials of the companies that such
proceed will be placed to the credit of
| the reserves. This is clearly improper.
The amount received does not represent
profit from the operation of the COM
pany, but the sale of assets, and the
proceeds from such sales should be
kept entirely distinct from earnings due
to operation.
In view OF the terms of the proposed
agreement and particularly the provi-
SionS relating to the amortization of re-
tirements, it is essential that the pro-
ceedS from the sale of all propertj in
cluded or to be included in the rate base
should be placed in the depreciation re-
serve and used to amortize the loss due
to retirements'
THE initial rate base fixed by the
unifcation agreement is to
remain in effect for 10 years and there
after until reyaluation is made. There
has been some discussion as to whether
the commission may begin revaluation
proceedings before the end of the 10
years or must wait until a decade has
passed. If the latter is the correct in
depreciation, the contract practically
fixes rate base for from IL to Is years.
This would seem to be an unnatural
construction, and the point could readily
be covered by adding sentence which
would give the commission power to be-
make a finding effective until 10 years
had elapsed"
"The practical effect of the 10-year
limitation is to deprive Congress and the
Public Utilities Commission of the power
to fix the value of the property and the
fares to be charged for at least 10 years.
In other words, the power to regulate
rates, a sovereign power, is to be sus-
pended for a decade. Rate litigation Is
replete with decisions holding that the
delegation of such power or its limita-
ton will not be upheld unless the SOW
ereign authority has clearly authorized
such action and 1t has been accomplish
ed in clear and unmistakeable terms.
Assuming that the unification agree
ment is a legal limitation of the power
of Congress and its agent, the Public
Utilities Commission. there will be no
authority anywhere to change the rate
base for 10 years. and the amount OBJ
tanned by the Interpretation of the
agreement will be the fair value of the
property for rate-making purposes for
a decade
Prices may decline, other methods of
transportation may be invented, eco
nomic and industrial conditions may be
altered, but the rate base will take
cogniZance of no such factors except
so Tar as they may AFFECT the cost OF
property which may be added during
the 10-year period.
No Change Authorized.
"The. surviving property will stand at
the amount now agreed upon, and. al
though conditions may so change as to
eliminate the present excess of repro
duction cost or of the $50,000,000 rate
base over actual cost. nevertheless the
public will be required to pay upon this
excess for 10 years. Upon the other
| hand, if conditions should so change as
to increase values, the present rate base
would remain unaltered"
1.-The proposed contract provides that
the new company shall be entitled to
earn reasonable rate of return (on the
rate base), except that the present
| Continued on Page 5. Column 81