The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1935-10-18
Trends
Utility in De troit
Makes Partners
Of Consumers.
by VINCENT LYONS
Times Financial Editor

~ steps in the history Of the
public utility industry was taken
yesterday when the Detroit City
Gas Co. agreed to proposal
whereby consumers are to share
in the profits Of the company. 1t
means that the user OF gas is to
become a partner in the enterprise
along with the stockholder. He Will
have a call on profits after a GER
tain point is reached, but is faced
with no liability.
Under the arrangement the utll-
ity is allowed earnings up to 1880
600. The first s550O00 earned in
excess Of this base is to be DIVIDED
between consumers and stockhold-
ers on a $3.50 basis. All earnings
in excess of $4,000 900, however, are
TO be distributed in a ratio OF 70
per cent to the consumers and 70
per cent to the stockholders.
As a result, consumers in par
ticularly favorable year stand to
reap a greater share Of the profits
than the stockholders.
Excess profits are to go to con-
sumers and stockholders in the
form of annual cash dividends.
Moreover, the proposal is not to
await the introduction Of natural
gas next July but will be made
retroactive to April 8, last. There
fore consumers might receive their
first pront-sharing dividend this
year,
THE proposal, which undoubt-
edly will be known as the
Detroit plan just as somewhat
similar arrangements in the past
have been identified with the cit
les in which they we're placed into
effect, hits a new note in the re-
lationship Of the utility with its
consumers. 1t probably will raise
considerable comment in public
utility circles throughout the
country.
In the first place, it is the ini-
tial attempt Of its kind to be made
concerning gas, the oldest of the
public utilities. In the second place
it outdistanccs all the previous
proposals by making outright cash
rebates to all consumers. In the
third place it skirts the valuation
question by establishing flat
earnings base.
The unique part of the Detroit
PLAN" is best indicated by
knowledge of the principles of the
plans that have preceded it.
The washington plan" adopted
in Washington, D. c., is system
whereby valuation was agreed upon
by the private utility and ,~.e
regulatory agency On the basis
of this valuation the utility was
permitted to earn a stipulated re-
turn. In the event of any return
above 8 per cent the consumers
were to get the benefit in the form
of rate reductions. In order to
make the plan effective it is, OF
course, necessary to make annual
adjustments,
IN Hartford, Conn, there is what
l. is known as the Hartford plan"
In this the element of use
enters into the picture. A certain
figure Of consumption is established
for each individual consumer. If in
the same month OF the following
year the consumer uses 25 per cent
more electricity he receives the adj
ditional 25 per cent at consider
ably lower rate than is charged for
general service.
Another plan, the identification
of which escapes the writer, has
been adopted in the South since
the advent of the IVA. This ar
rangement, modification of the
Hartford plan" is also predicated
on the idea of increased electricity
at reduced rates.
In addition to these three plans
there have been occasions in the
last few years when telephone COM
panies returned excess earnings to
its customers.
Frank p. Fisher, consulting en-
gineer for the City of Detroit, says
vi the new plan that this agree
ment is a form of relationship be-
tween the customer and the utility
that has never before been effected
anywhere"
The Detroit City Gas Co. I'M
doubtedly will gain an important
point by its acceptance Of the
profit-sharing plan. 1t is expected
that the city will withdraw from
the Nov ballot a proposal to
establish and operate a municipal
gas works. The move toward
municipal ownership was started
when the city ran up against a
stone wall in its efforts to get re-
duced rates.