Evening star., 1936-01-10
POWER PROFIT CUT
To G PER CENT TOP
URGED BY ROBERTS.
PEOPLES Counsel Argues
Pepco Earnings Last Year
Warrant New Rate.
CLAYTON BACKS SLASH;
DEMANDS VALUATION
Data Submitted to Justify Lower
Consumer Cost of Hear
ing Opens.

Recommendation for cut from ITO
6 per cent in the basic rate of return
allowed the Potomac Electric Power
Co. under its sliding scale plan for an
nual adjustment of consumer charges
was presented today to the Public
Utilities Commission as it opened hear
ings on possible modification OF the
plan.
The proposal came from Peoples
Counsel william A. Roberts, who con-
tended the cut in the allowed basic
rate of return was justified by the
actual larger profits made by the con-
Germ and by the greatly reduced money
rates now prevailing.
The hearing was adjourned nden-
nitely at noon to allow accountants
Of the commission to study the annual
report of the company. not yet sub
mitted but due in few days. 1t
was expected the hearing would be re-
opened on or before January "a.
Bond and stock investors today are
willing to accept much less profits
, than in previous years. as indicated
by trend in reports OF financial deal
ings on file with the Securities and
Exchange Commission and other mar
ket data, the commission was told.
Folsom Presents Figures.
Roberts position was promptly sup
ported by William NICK. Clayton. vet
eran chairman of the Public Utilities
Committee of the Federation OF
utilities under control of the commits
sion.
Hinman D. Folsom, assistant cor
poration counsel assigned to commits
sion work, opened the case by pre-
sentation of masses of statistical data
intended to show grounds for re-
duction in the basic rate Of return.
S; r. Bowen, counsel for the power
company and spokesmen for its presi-
dent DR.. William Mcclellan, agreed
to presentation of the data, but re-
served the right later to contest their
submission as evidence If he determ-
ined to oppose their official consider
alton.
The power company keeps all its
profits collected in any one year. un-
der the terms of the sliding-scale
plan. However, the plaza provides
that certain portions of any income
In excess Of the per cent basic re-
turn shall be considered for consumer
rate reductions in the following year.
Roberts made particular point Of
the fact that the District Supreme
Court in 1888 upheld action Of the
commission in an order for 10 per
cent cut in charges of the Chesapeake
g. Potomac Telephone Co., which was
figured to permit that concern to
make only a 6 per cent rate Of return.
Roberts point was that the court had
found that a per cent return to
that company was not unreasonable
or confiscatory.
Urges Formal Valuation.
Also, he cited the recent adoption
of sliding scale plan for the Wash
ington and Georgetown Gas Light
Cos. under which the basic rate Of re-
turn allowed those concerns was fixed
at 6.5 per cent instead Of z per cent.
Roberts argued that common stock
holders of the power concern still
could expect to receive dividends as
high as 10 per cent. even though the
commission cut the allowed basic rate
jpf return from Z to per cent.
: Emphasizing the considerable de-
clines in costs of financial loans in
the past few days, as well as in the
yield the public is willing to accept
on their utility investments. Roberts
declared:
Investors are willing to predicate
for a considerable future time their in
vestments on a yield decidedly lower
than IN former years Investors would
accept 6 per cent basic rate of re-
turn on the investment base of this
company"
Clayton declared the federation, now
as in former years. has held the rate
sof return for Washington utilities
should not be more than per cent.
He also voiced objection that there is
no formal valuation figure for the
properties of the power company, that
( the present per cent rate is allowed
!. on an agreed rate base" which is
not a commission valuation" as pro-
vided for in the District utilities act.