Evening star., 1935-11-09
STUDY Of PEPCO
RETURN ORDERED
BY COMMISSION
7 Per Cent Figure May Be
Revised Downward on
Basis of Net Excess.
STUDY TO BE PRELUDE
TO RATE ADJUSTMENT
Annual Hearing on Charges to
Follow in January-Last
Cut $500.

An investigation Of the rate Of re-
turn allowed the Potomac Electric
Power Co. under the present sliding
scale agreement was ordered today by
the Public Utilities Commission as q
prelude to the annual adjustment of
rates to be determined In January.
Notice was served on William Nc
clellan. president of the power COM
pany, that the commission had con-
cluded that existing facts warrant
consideration Of the rate Of return
prior to the January annual hearing.
The company last year reaped q
profit Of nearly 100000 under rates
then existing. This was the net
operating income. The excess over
the allowed Z per cent return was
found to be $295,000. The commits
sion last January set aside $l47 500
for reduction In rates. which was
spread over several brackets.
These facts and the wording used
by the commission in its notice to the
company set up possibilities of a re-
duction Of the rate of return which
might be allowed the company under
the suggested revision Of the present
sliding-scale plan.
New Shares to Be Issued.
The development came suddenly to-
day as a sequel to announcement the
North American Co., giant utilities
holding company, is to issue rs partic-
ipating shares for each of its $4,000
odd common shares held in the WASH
ington Railway & Electric Co., which
owns the Potomac Electric Power Co.
outright.
That plan. filed with the Federal
Securities and Exchange Commission
some days ago, now is being scruti-
nized by the Public Utilities Commits
sion and Peoples Counsel William A.
Roberts, as we'll as by the Federal
commission.
The North American stated It pro-
posed to sell on the open market its
holdings Of the participating shares,
which would be substituted for the
present Washington Railway & Elec-
tric shares, and then have but q small
interest in the local holding concern.
With the North American suggest
ing it would expect to sell its partici-
pating shares at prices up to $50 q
share, local experts have figured the
North American would reap Q huge
profit in the stock disposition.
Wording Of Letter.
The commissions letter to Presi-
dent Mcclellan stated:
THE commission for some time has
been giving serious consideration to
the matter of rate of return allowed
your company under the existing slid
ing scale arrangement.
1T has concluded that the existing
facts warrant consideration prior to,
or at the time Of, the annual rate
hearing. Timely notice under the
statute as to date Of hearing will be
given"
Members of the commission, in dis
cussing the investigation move, re-
Trained from any forecast Of the out
come of scrutiny of the allowed rate
of return under the sliding scale.
Riley E. Elgen. commission chair
men, explained generally he thought
the commission from time to time
should investigate to see if it was
desirable to consider changes in the
sliding scale plan. He said he thought
now was q time when there should be
an investigation as to the propriety Of
the present scale.
$66,073,182 Rate Base.
The present scale became effective
in January. 1888. It allows a z
per cent return to 60 wholly to the
owners Of the P. E. P. Co. The rate
of return last January was applied
to an agreed rate base, or valuation,
Of $50, ,073,182.
One-half Of the excess Of the re-
turns between 2 and 8.25 per cent
was to be returned to the p. E. p.
Co. subscribers in rate reductions
under this plan. Three-fourths Of
the returns between S.25 and per
cent was to be used for rate reduc-
tions. Ffve-sixths of the excess profits
over 0 per cent was to be applied in
rate reductions.
The total net income Of the Pepco
was found last January by the COM
mission to be $4,920,123. The excess
(See PEPCO, Page -