Evening star., 1928-12-31
The Merger Issue Drawn.


reply of the traction companies to the
Maltbie and Bureau of Efficiency re-
ports on the merger agreement leaves
no doubt in anybody's mind of their de-
termination to fight to the last ditch
for a rate-making valuation written
into this agreement, and for rate
making valuation of fifty million dol
lars.
The companies draw the issue that now
blocks the merger, and draw it clearly.
They point out that the individual
companies possess recognized rate-basis
valuations. established through the
courts. They defend their right to
maintain this status, under merger,
until a new valuation is made. The
only concession at which they hint is
the possibility that the merger agree
ment instead of containing valuation
to stand for ten years, recognize valu-
alton that will stand only until super
seeded by new one. This new valu-
tion might require a minimum of five
years to establish.
The companies point out that public
utility corporations have stockholders
entitled to know the basis upon which
to figure rates Of return. They ques-
ton the fairness of being asked to sur
render their >rate status, obtained
through the courts and recognized by
the regulatory bodies, and to receive, In
return, merely the promise of new
valuation. In the interval between
merger and new valuation they would
be left with no recognized basis upon
which to plead possible readjustment
of fares. Their statement that with
out some established base upon which
matters affecting rate structure may be
approached there is no logical way to
operate a public utility under public
regulation" summarizes their whole
argument.
The companies show some resentment
over implications that they deliberately
sought value above that to which
they are legally entitled. Their answer
to DR.. Maltbie's charges of excessive
valuation resolves itself into a counter
charge that DR.. Maltbie declined to
agree with the findings Of the courts,
while the Public Utilities Commission
by law is bound implicitly to follow such
findings. They contend that DR.. Malt
-. fosj - be "a Of
value in spite of his conclusions as to
depreciation and reproduction cost.
As the Bureau Of Efficiency and the
Public Utilities Commission have taken
the companies viewpoint on the valu-
alton question, it now remains for DR..
Maltbie to submit brief in rebuttal,
to restate his original contentious that
q fixed valuation is the unusual, rather
than the usual, procedure in merger
agreements, and to reiterate his argu-
ment that the whole section relating to
valuation be dropped. Should the COM
mittee decide to adopt his suggestion
there, of course, remains the possibility
that the companies might accept, but
only with a view to eventual litigation,
which, they have contended, would es-
tablish for the new company higher
rate making valuation than that agreed
to for the merger.
In their answer to the Maltbie and
the Bureau of Efficiency reports the
companies express willingness to ac-
cept DR.. Maltbie's suggestion that they
shall be protected from competition
through the public utilities power Of
approving new companies only upon
the ground Of convenience and neces-
sity." The companies further express
their willingness to accept either the
Bureau of Eficiency's or DR.. Maltbie's
proposed Qualification of the power
clause.
The companies reply should be re-
earded as diminishing the debatable
issues, thereby Fastening the time when
Congress can act for the benefit OF the
car-riding public by ratifying just
agreement for merged operation.
A.