Evening star., 1928-12-30

Below: JOHN III. HANNA.
lowest figure that the companies will
voluntarily accept at the present time
as a basis of merger, and in view of
the court decisions in the cases of the
Potomac Electric Power Co. and the
Capital Co., there is good reason to
doubt whether revaluation at this
time would result in lower figure
False Value Is Denied.
"There seems to be feeling that
the companies in submitting the uni
fication agreement in it's present form
have attempted to establish a value
greater than that to which they are
tent of the parties to the agreement,
and the amount Of $50,000,000 was
stated as a compromise fair to all par
ties.
"The outstanding objection of DR..
Maltbie Is directed to the necessity for
having an initial rate base continued
for a decade. DR.. Maltbie, however,
furnishes no substitute method for the
determination of rates, even for
shorter period. It has taken the ex-
isting street railway companies over
10 years to obtain their present sta
tus as to rate bases and the object OF
the unification agreement in effect Is
merely to recognize the existing status
for the period mentioned In the uni
fication agreement, and therefore dur
ing such period to avoid litigation ana
give stability which the companies be-
lieve to be in the interests OF the
utilities and the public alike.
"a valuation for rate-making pur-
poses Is written into the merger agree
ment for fundamental reasons. The
companies involved in the merger now
have rate bases and had 1t been con-
templated that merger as provided
by law meant abandonment OF legai
rights without substitution therefor OF
like rights. there would have been no
merger agreement. The report under
discussion seeks to imply that the par
ties are taking advantage of necessary
legislative approval to lug in some new
advantage to themselves. Notnlng can
be further from the facts.
without 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.
Original Agreement Amended.
"It must be borne in mind that the
original agreement between the owners
(dated February 10, 1929 was modified
and amended by the Public Utilities
Commission and the agreement OF April
z, 1928, was substituted therefor. The
original agreement provided for fixed
valuation as of the date thereof, for
all time. with capital additions OF ex-
tensions. betterments and Improvements,
ii. as and when authorized by the COM
mission constituting the future rate
base. This feature appeared to hnd
disfavor among organized cittzenry ana
it was at the suggestion Of official rep.
resentativeS of the Federation OF
Citizens Associations, made during the
hearings before the commission, that
the parties to the agreement accepted
the lO-year feature for revaluation.
"This original agreement also pro.
vided that the unified company should
have the right (no guarantee. OF any
kind or nature was written or impueO
to earn z per cent annually on the
said rate base. This feature was struck
out and fair return substituted. as a
compromise in part, OF the differences
with the commission.
"The companies very earnestly urge
that to leave out any mention OF a rate
base would be very decidedly to the
disadvantage of both the public and
themselves. The parties to the agree
ment assume and respectfully submit
that they have a right to assume that
the decisions and findings OF the Public
Utilities Commission as modified in one
case by the court Of last resort are hnal
and binding upon the parties until a
new valuation shall have been made In
accordance with law.
Demand Definite Status.
eff a merger without an agreed val
uation to continue at least until there
is a reyaluation is agreed to by the COM
panies, what will be the situation?
without attempting to enter into a legal
argument, the practicable situation
which would arise If the companies went
into a merger without an agreed rate
base is clear. Immediately upon mer-
ger being consummated a new situa-
ton would exist. The rearrangement
companies will be very largely within
the control of the Public Utilities Com
mission and possibly of other regula-
tory bodies. We venture to predict that
the very persons who are now arguing
that an agreed rate base is unnecessary
would be the first to argue after unifl-
cation that the existing valuations
would have no status. What position
the Public Utilities Commission and the
courts would take on this question no
one can predict. But at best the COM
panies, If they went into merger
without an agreed rate base, would be
merely inviting extensive litigation
should any situation arise which might
necessitate change in fares before a
revaluation for the unified company
can be completed.
"It appears to be conceded on all
sides that as soon as unification is
brought about a valuation of the street
railway properties should be made
There is nothing in the present unfit
cation agreement to prevent such q re-
valuation beginning imediately after
the merger. The Bureau of Efficiency
states that it would probably require a
minimum of five years to value the To-
cal street railway properties and carry
the cases through the courts. DR.. Malt.
bic says that the estimate OF time and
money required for a revaluation is
about three times what would be nec-
essary with the cooperation OF the
companies His estimate probably is
therefore, that 1t would require less
than two years Under the nniacatioI