Evening star., 1942-09-18

whereas between 1925 and 1881 when
the reasonable rate of return" was
supposed to have been TX per cent of
the agreed-upon value of company
property, the actual return ranged
between $50 per cent and 1911 per
cent, with average excessive earn
ings of more than $1,000,000 per
year?" He raised similar questions
concerning later years, during which
the basic rate of return under the
sliding scale plan was reduced to 7
per cent, then 6l2 per cent and finally
to per cent.
Sliding Scale Explained.
On this point commission experts
explained that under the sliding
scale plan the affected company is
permitted to keep any profits it may
make above the basic" rate of re-
turn, but that the excess over the
basic return is used to determine
by how much consumer rates are
reduced the next year. Mr.. Flan-
agan said this principle had been
we'll understood in past years.
In concluding his opinion, Mr..
Hankin said: There is another
phase of this order which must not
be overlooked. Any rate investiga-
ton must take into account condi-
tions of the times. We are at war,
war in which all military and
economic forces play a part. Rates
must be adjusted in the light of our
war conditions and new policies. If
the present order means that this
vital part of rate making is to be
omitted from consideration, I must
dissent on the ground that in doing
so we are neglecting our first and
foremost duty"
When asked for comment on this
point, Chairman Flanagan said:
Il am fully aware of the fact that
we are at war"
Base Established in 1924.
In his formal reply to Mr.. Han
kin's dissenting opinion, Chairman
Flanagan recalled that the rate
base under the sliding scale ar
rangement, as of December 81. 1924
had been established by what was
then the Supreme Court of the Dis
trict and that the consent decree
which motivated the plan termi-
mated years of valuation proceed
ings and litigation, and that prior
to that date power company rates
had been maintained at a "high
level"
THE District has been spared
such expensive proceedings, since
that time" he added, while enjoy
ing progressive reductions in rates
The basic theory underlying the
sliding scale arrangement was tc
provide an incentive for economical
management and to insure that
consumers also would benefit
through rate reductions"
Mr.. Flanagan said the effect on
typical monthly bills for the resi-
Dental consumers was shown in the
following comparison: That while
the rates in 1924 were $3.50 for 25-
kilowatt-hour consumption, $40 fol
Neutrality-suspicious. consumption ano
$3.50 for 250-kilowatt- hour con-
sumption, the comparable figures fol
1941 were SO cents for the first brac-
ket, $256 for the second and $4.91
for the third.
Points to Rate Reduction.
Mr.. Flanagan added that, while
the aggregate reductions in rates
between 1924 and 1910 totalec
1884 ,044, to demonstrate the cumu.
lative effect of the reductions it wa.
estimated that had the 1941 sales o.
power been calculated at the aver.
age rate in effect in 1924, the con.
sumers would have paid "at leas
$33 900 900 more than they did pay
in 1941.
He concluded:
TO relate dividends to the pa
value of common stock, only, and t.
ignore the substantial amount o
earnings which have been retaine,
in the business, in order to avoi