Evening star., 1938-01-26
CUT OF $760,0O0
IN ELECTRIC RATE.
POSSIBLE IN ORDER
Utilities Commission Hears
Argument to Reduce Basic
Return to 6 Per Cent.
DECISION is EXPECTED
AT MEETING TOMORROW
Pepco President Doubts Wisdom
of Drop in 6.5 Per Cent Now
Allowed Company.
By DON S, WARREN.

BY DON S. WARREN.
Electric rates in the District viii
be reduced for this year by roughl.
$760,000 If the Public Utilities Com
mission cuts the basic rate of return
allowed the Potomac Electric Powel
Co. from 65 to 6 per cent, according
to evidence now pending before tn,
regulatory agency.
If the commission decides to max,
no change in the initial return undel
the company's sliding scale plan fo
annual rate adjustments, the pros
poets are the consumer rate reduc.
tions will aggregate between $548, O0(
and $56O,OOO.
These calculations are based or
financial data submitted to the com.
mission at the annual hearing or
power rates yesterday, when the com.
mission also considered the reason.
ableness Of the present sliding scale
plan.
Hearing Resumes Tomorrow.
The hearing will be resumed tomor.
row, when the commission is expected
to rule on the basic rate of return tt
be allowed in 1888. Thereafter, the
company and commission staff are ex.
pected to submit proposed new
schedules.
Objections to any change in the
sliding scale plan were voiced yes
terday by company spokesmen, par.
ticularly as to the basic rate of return
but there was no definite indication
the company considered a court fight
should the commission order a re-
| duction to 6 per cent.
While company. spokesmen fought
against the suggested cut in the basic
rate Of return. DR.. William McClel-
Ian, president Of the concern, told the
commission:
Il cannot bring myself to sit here
and say that to change the norma
rate Of return from 6.5 per cent
would be grossly unfair. but I doubt
the wisdom of it. If the commission
should find it necessary to reduce the
rate OF return, hope 1t will be done
gradually. We are getting closer tt
the point where the increase in bust.
ness (of the power company, which
has made possible the annual reduc.
tions In rates to the consumers, j.
going to slow down. None Of us wants
to see such a drastic reduction in the
rate Of return that there will not be
annual reductions in consumer rates
Sees Increase Possibility.
THE beauty Of the sliding scale L
that it has caused annual reductions
but the same sliding scale will result
in an increase in consumer rates II
profits are substantially reduced.
hope the time will never come wher
this commission will have to raise
consumer rates."
He referred to the fact that each
year since the sliding scale was adopted
in December, 1924, the excess" profit.
Of the company, above the initial rat,
Of return, have been sufficient to per.
NIT consumer rate reductions the mex
year.
Evidence submitted to the commits.
sion by B. M. Bachman, commission
chief accountant, showed that on .
valuation" Of the company of som,
S73, ,40O,0 900, the company last year hat
gross revenues Of some 4,7OO,00
that operating expenses amounted Il
S8,800.000, plus some $1,400,0O0 t.
meet fixed charges and amortization
and that some 81, 100000 was availabl,
to common stockholders. The amour
actually distributed to common stock.
| holders was calculated at $3,90O,0O(
as dividends, this amounting to 5.3l
per cent Of the rate base, or 65 pei
cent Of the par value of the common
stock.
Clayton Urges Basic Rate Cut.
After sparring with the commission
during the morning session on tn.
lack Of a formal and orthodox
valuation Of the company's property
William NICK. Clayton, counsel fol
the Federation of Citizens Associa.
tions, late yesterday placed his organ.
ization on record as favoring a re.
duction of the basic rate of return
to per cent.
He declared: 1.-THE company nego
tiated the sale of $40 0,000, 900 of bond.
during the past two years, selling
them at $104, at 3A interest rate
the bonds to come due in 1866. Z
this is not evidence to suggest tha
the power company is in an extraor.
dinary fine financial condition,
don't know what is. The company
must have most satisfactory earning.
beyond the ordinary and every veal
the reductions in consumer rates havl
been caught up and passed in tn.
earnings of the company in the mex
year.
I'VE may be approaching the tim,
when consumer rate reductions may bt
dwindling, under operation Of tn,
sliding scale plan, but we now arr
dealing with present conditions. Tn,
company could well afford a reduc.
ton of the initial rate Of return to
per cent and still recoup this reduc.
ton handsomely in the coming year.
The difference in the prospectiv,
consumer rate reduction If there is n,
change in the basic rate Of return
developed over dispute between tn
company and the commissions stat
over the treatment of the amount To-
working capital. Guy G. Carbon, as
sistant commission accountant, sub
mitted report contending that $685.
900 of the sum for materials and sup
plies should be eliminated as no
properly part Of the company's in
| vestment. The point was fought bit
| terly by S. r. Bowen and other com
pany spokesmen, although the effec
| on possible rate reduction woult
amount to but $4,000.
Audubon Society to Meet.
The forty-first annual meeting o
the Audubon Society Of the Distric
of Columbia will be held at 8 o'clocl
| k>.S~S.k <1.a ya sta1aOtox4 (1S1k IN