Evening star., 1928-12-06

to authorize new forms Of transporta-
ton. Police powers should not be bar
gained away, and the courts are very
reluctant to approve contractual limi-
tation of such powers, as numerous de-
cisions In rate cases clearly indicate
Condemns Power Provision"
The report criticizes and condemns.
because OF Its uncertainty in actual
application now and in the future, the
power provision" of the uniflcatlon
agreement. This provision contemplateS
a contract by the Potomac Electric
Power Co. to supply the new transit
company with power on such terms that
the net cost thereof to the new COM
pany shall not exceed the aggregate
cost of power to the two present COM
panieS II the present arrangements were
continued.
The report states: "If one were to
follow the reports of the companies, the
aggregate cost of power would be 1924
7O8 for 1927, after eliminating inter-
company sales and after deducting the
revenues from sales to non-merger COM
panies. But this Is not as the
presidents of the two companies con-
strue the term aggregate cost They
would eliminate all depreciation charges
from cost and all revenue from sales to
companies outside of the merger. Upon
this basis. the aggregate cost would ne
$3.50 .725 for 1927, including the price
paid for current sold to nOn-merger
companies, bat not deducting the
amount received for it,"
Guiding Principle Missing.
when at some future time one is
trying to decide what the limiting force
of aggregate cost of power would be
were the present arrangements
continued as applied to the cost at the
generating station. he will be faced with
a number of problems, and there Is no
guiding principle in the proposed unfit
cation agreement.
Those who have taken most active
part in the negotiations and the draft
ing of the contract do not agree now
as to how the standard specified shall
be applied. How much more likely that
they will not agree in the future!'
Continuing, the report states:
1T is very significant that neither In
the power clause nor in any OF the
above suggestions Is there any recog-
milton of the idea that the new COM
pany shall have any benefit from any
future economies or reduced costs in
power production, transmission and con-
version that may come from unif1ca-
ton or from electrical progress. The
Potomac Electric Power Co. would keep
all Of the gain, and the expenditures
required to obtain the benefits OF uni
fication and possibly other expenditures
are to be added to the rate base
upon which the new railway company
is entitled to earn return.
Future Not Provided For.
"The failure of the agreement to pro-
vide that the new company shall bene-
fit from future economies and progress
in the electrical industry Is, of course,
It negatives the whole the
ory of Government regulation. 1t pre-
vents the public from receiving any
of the benefits Of electrical progress.
The public is not to be allowed
to share in the lower cost Of render
ing the service.
''If aggregate cost does mean "a lump
sum and that lump sum is $3.50, 900, a
still greater injustice would be done. For
il the amount of energy consumed by the
two railway systems were to decrease,
the amount paid for power should de-
crease and not remain fixed. Further,
If the amount sold were to decrease or
the contracts Cancelled or not renewed,
The power company should not increase
its rates to absorb the decrease. Like
wise, any increase In consumption should
not work to the disadvantage of the
power company"
In another place the report reads:
why should not the Public Utilities
Comission fix the rates charged by the
Potomac Electric Power Co. to all con-
sumers? Why should the rates paid
by the general public be regulated by
commission action and not by contract,
and the rates paid by railway compa-
nies be fixed by contract and not by
regulation particularly when the Latter
will in turn become factor IN fix1ng
fares to be paid by the public?
Flexibility Need Seen.
Important reasons why regulation
has superseded contracts are the need
for an adjustable method fitted to
changing conditions which cannot be
foretold, the tendency Of long-term con-
tracts to become unfair and the posSi-
bility of discrimination. If these apply
to the ordinary consumer, they have
still greater force in relation to con-
tract such as proposed here, where great
changes are certain to occur"
With reference to the merger value
and rate base, the report states that
to bring about merger under the plan
of exchanging stock, ETC., proposed "it
would not be necessary to value the
property acquired by the new company.
Indeed, companies are seldom merged