Evening star., 1932-04-17
CAPPER CONDEMNS.
STREET CAR MERGER
IN TALK ON RAD|O|
Senate District Body Head
Sees Bonus for Firms in
Outlining Report.
HITS PEPCO POWER SALE
TO WASHINGTON RAIL WAY
Kansan and Blaine Recommend
Prudent Investment Theory
of Utility Valuation.

Analysing his objections to the street
railway merger resolution in its pres
ent form, Chairman Capper of the
Senate District Committee asserted in
a radio address last night that when
the main features of the plan are
weighed 1t seems to him the people of
Washington would be virtually giving
these companies a substantial bonus
to accomplish a merger"
Speaking from station WMAL, Sena-
tor Capper outlined the changes he
and Senator Blaine of Wisconsin are
advocating in their minority report to
the Senate, including the following sub
jects:
A new power clause that would give
the Utilities Commission control over
the price at which all the current re-
CURED Tor the merged car system would
be supplied by the Potomac Electric
Power Co.; a free transfer with each
street car or bus fare except de luxe
busSeS; establishment of the prudent
investment theory of utility valuation in
the District, and providing that the
findings of the commission as to facts
would not be subject to overthrow in
the courts; confining the new car sys-
VIII W bllC uoC VI SuDolQIdIltS lOI Op-
Grafton outside the District and an
amendment inSuring the right of Con-
greSS to repeal the merger resolution or
any charter or certificate of incopora-
ton made under it.
Companies Want Merger.
The companies want this merger"
said Senator Capper They need it. !
l nave been almost deluged by letters
from interested stockholders in favor of /
IL. The companies attorneys and other |
representatives OF the corporations con-
cerned in this matter have been very
active on Capitol Hill In the name of |
common sense, why should the public !
of Washington pay for a merger that
the companies Want?H
The merger resolution authorizes |
consolidation of the Capital Traction |
Co. and the Washington Railway Co. !
INTO new company, to be Incorporated |
under District laws
Before launching into a discussion |
OF the power clause of the pending |
resolution, Senator Capper explained |
that the Washington Railway e. Elec- |!
tric Co. owns the Potomac Electric |
Power Co., one of the richest utility |
corporations in this section. and the |
Railway & Electric Co. is |
in turn. controlled by the North Amer
lean Co., holding company"
Now, the Potomac Electric Power |
Co. Is not included in this merger"
Senator Capper went on. "It is to |
continue as property of the Wash
ington Railway g. Electric Co. At
present the railway company buys |
power from its subsidiary at an ex-
tremely low cost and sells this power I
profltably to other railway companies |
The electric company does not get a !
fair price for this power Consequently |
the rate that Washingtonians pay for |
electricity is probably not as low as it |
should be, for the company is deprived !
Of hundreds of thousands of dollars |
Of profit through its contract with the
Railway g. Electric Co.
Full Regulation Deferred.
Under the terms of the resolution |
as reported by the majority of the |
Senate District Committee, the cleo !
trio company is to furnish power to !
the new company under a l5-year |
contract. The companies would settle |
between themselves the price to be |
paid for 63 per cent of the power, while !
only 81 per cent of the total would |
be fixed by the Public Utilities Com |
At the expiration of the Is
year period the commission would have |
control Of the entire situation.
Now, Senator Blaine and do not |
think this is fair arrangement. There |
exists consent decree under which the |
Potomac Electric Power Co. must use |
part Of its excess profits each year in |
reducing rates to the public. OF course, |
the North American Co. would like to |
M 10
taken out Of the Jurisdiction of this |
decree and handed over to the new
company. The new company would |
profit by its sale of power to other !
railway companies in this vicinity, but !
the consumers of electricity in the Dis |
trlct would get no benefit.
This amounts really to giving the |
new company an annual present Of !
about 100000, which is what the !
Railway & Electric Co. !
makes each year through its power sales /
IN and out of the District Why should |
TINS new company engage in a business |
that Is properly that of the power COM |
pany? And why should the Public Util- |
tiles Commission be told TO keep its |
hands off this arrangement? 1t is the |
business of the commission to fix rates !
This power clause in the merger agree
for IS years"
The minority report recommends that |
new clause be inserted giving the |
Utilities Commission jurisdiction over |
all the current needed for the merged |
railway system.
The majority report provides for free
transfers between all street car lines, !
but leaves the commission to determine |
how transfers shall be issued from cars |
to busses. Senator Capper contended |
for free transfer with each street car |
or bus fare, except de luxe buses, and |
added that If the Washington Rapid |
Transit Co. becomes a part of the |
merged company, the free transfers |
Shouio apply TO it also, subject to rea-
sonable conditions.
Discussing the recommendation made |
by Senator Blaine and himself for J
establishment Of the prudent investment I;
theory of valuing street railways and |
all other utilities in the District, Senator |
Capper said /
Must Ask Instruction,
You may not know it. but when the |
commission today sets out to find what |
a public utility company is worth. for
rate-making purposes, If it is In doubt |
ABOUT the elements of value to be con-
sloereo, 1t must ask the District |
Supreme Court to give some instruc- !
tions. That is the law. No other State |
in the Union has such an incongruous |
law. AS a matter of practical fact the |
commission does not admit having any |
doubt about the elements of value, in
most instances, but completes its valua- |
tion. On this valuation it may fix rates. |
In the past, cn completion of a |
valuation by the commission. the figure
would be disputed by the utility COM
pany, and the matter would be thrown
into court Then the court would set
valuation OF the company's property, |
and the commissions work goes out
the window.
The minority has suggested an