Evening star., 1937-11-30
Investigation of Return Is
Ordered by Utilities
Commission.
SLICE IN SLIDING SCALE
TO 6 PCT. MAY BE MADE
Reduction Last January Was
1904, ,021-Plan Has Been in
Effect Since 1924.
BY DON S. WARREN.

Reduction of the rates of the
Potomac Electric Power Co. bv nearly
sl,000,000, effective next February /
was suggested as a possibility today
when the Public Utilities Commission
ordered an investigation of the rate
OF return to be allowed the concern
under its sliding-scale plan.
The commission did not specify
what new basic rate of return might
be proposed at forthcoming public
hearings, but there were clear in
dications it would consider reducing
the hrst step of the sliding scale from
6,5 per cent to 6 per cent.
Last January the profits of the power
company were sufficient to enable the
commission to order a consumer rate
reduction aggregating s504,O21. Un-
of1lcial observers calculated roughly
that If the basic rate of return were
reduced to 6 per cent. the profits of
the company for this calendar year
would be found high enough above
that rate to show prospects of a con-
sumer rate reduction for next year
close 10 81 100000.
In Effect Since 1924.
The sliding-scale plan has been in
effect, as applied to the power COM
pany, since 1924. At the outset utility
magnates generally forecast that the
plan probably would men that rock
bottom" had been reached as to con-
sumner rates.
However. the commission records
display an entirely different story.
Each year since the sliding scale has
been in effect there has been reduc-
ton in consumer power rates. Also.
the commission twice has found cause
to reduce the basic rate of return
allowed under the sliding scale. In the
beginning the basic rate of return was
fixed at rs per cent. Later it was cut
down to Z per cent. and two years ago
the commission ordered it reduced to
65 per cent
Victory for Commission.
Meanwhile, the commission ordered
reduction in the rates of the Chesa-
peake & Potomac Telephone Co., and
this was taken to court. The COM
mission won a victory in that case
and the decision of the court sus.
tanned the reasonableness OF the COM
missions order which was calculated
to leave the telephone COMPANY with
rate OF return of approximately 6
per cent. Since that decision. the
commission has received suggestions
several times that the basic rates Of
returns allowed the power company
might reasonably be reduced to 6 per
cent.
The sliding-scale plan was estab-
lsned here first in the case of the
power company as a result of the
1924 consent decree of District Court
which ended protracted battle over
rates under which approximately
S6,0o0000 of customer payments had
been impounded. This huge mellon
was cut roughly $3.50 between the
company and its customers.
1851, 900 in 1882.
The largest rate reduction in anv
one year resulting from the sliding
scale plan was 1851 900, effective in
1882 on the basis of the profits of
the company in 1881.
The rate base, or the valuation of
the power company for rate-making
purposes, was fixed by the commission
at s70,l36. 900 as of December 81. 1885,
1t Is against the rate base that the
sliding scale is applied in calculating
the extent of the excess profits which
are used in figuring future rate revi-
sions OF the company. In any one year
the company keeps all the profits it
may take in, but, under the present
sliding-scale plan a sum equal to a
certain percentage of the excess above
6.S per cent is considered the sum to
be applied in rate reductions effective
the next year. This percentage for re-
duction of consumer rates increases as
to the extent the profits exceed the
basic rate of returns.