Evening star., 1942-08-16
Gas Rates Hearinq
Ordered Tuesday;
Hankin 0verruIed
PUG Chuirmon AssuiIs
Colleagues and Charges
Plant Assets inflated
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year until last year when no changes
were made due to a drop in COM
pany profits.
One of the major issues raised at
the conference by Mr.. Hankin was
whether the rate base, or valuation
of company holdings, should be re-
duced by Sl,055 900. by using the
original cost OF land purchases
some of them dating back to 1848
instead of the appraised values
incorporated in the agreement in
1885. The effect of such valua-
ton ruling would be to raise the
percentage of profit of the COM
pany in the past test year to a
figure higher than the 5.ll per cent
of the rate base reported by COM
mission accountants.
Mr.. Hsnkin had agreed with E.
Barrett Prettyman, company coun-
sell that additional time would be
needed to prepare evidence on this
and other issues, but Commission
ers Kutz and Flanagan could not
see why the hearing should go
over" for two months. Mr.. Flan-
agan said the hearing would devel-
op facts on which to decide whether
the rate boost order, if one is found
justified, should be withheld pending
future investigation of issues raised
by Chairman Hankin. Also he ques-
toned whether fundamental"
changes in the sliding scale plan,
such as adoption of the original cost
theory of valuation, should be in
volved in rate schedule adjustment
case instead of being held for sep
arate investigation.
The commission's order for invest
igation and hearing on the gas rate
adjustment case was issued March
20. The order did not specify that
the case include question of sub
stituting original cost for appraised
value as valuation principle, Mr..
Flanagan explained
Recalls Recent Ruling.
Aroused over the action of Com
missioners Kutz and Hankin in or
dering the hearing started Tuesday,
Chairman, Hankin held press con-
ference in which he referred to a
dissenting opinion he had issued
June Gin another utility case). I'm
that opinion said Mr.. Hankin, Il
pointed out that there seemed to
have been an attempt in this COM
mission to be guided only by testi-
mony produced by the utility"
Involved on that occasion was the
ruling of Gen. Kutz and Mr.. Flan-
agan permitting the Potomac Elec-
trio Power Co. to sell to its parent
comany, the Washington Railway
& Electric Co., 10000 shares of its
common stock, at $100 share.
During the Friday conference, Mr..
Hankin had posed questions as to
whether all of the higher salaries
Of company officials should be
charged against the consumers in
stead of against the stockholders.
Also. he announced he would chal-
lenge various other items as charges
against operating expenses, such as
promotion and advertising costs,
handling of costs of the company
for sale of gas appliances. and ex-
penses for the welfare and morale"
Of company employees.
Issues Statement.
In his statement yesterday to re-
porters. Mr.. Hankin said:
"A sliding scale arrangement is
q very good one and can be made
to operate in fair manner pro-
vided you start with an honest-to-
goodness rate base-taking into ac-
count revenues and charging as ex-
penses only those items properly
chargeable as expenses.
4If YOU start with rate base
which is inflated and you charge
as expense items which shouldn't
be charged to the public, then you
will have large proflts-excess
profits by the utility-and at the
same time you will be getting re-
ductions in rates and be fooled into
thinking that because Of the sliding
scale plan something is being re-
turned to the public
Mr.. Hankin then related some of
the charges he had made in the
Pepco- -Wreco stock sale case. He
added that when sliding scale plan
was adopted for the power company
Gin December 1924, the rate base
was placed at $32 100000 as Of that
time. Mr. Hankin argued that this
was too high since the original cost
of the plant was only some $22 ,000,-
600. Since then, they say the pub
lie has enjoyed rate reductions, but
what really happened was that the
public overpaid on the rates some
where between $20,000,000 and s34,-
600 .OO0-over a period Of II years
depending on what theory OF COM
putations are used" he continued.
AS to the rate base of the gas con-
Germ, he said he had not made a
thorough examination of the facts
and therefore could not say by how
much the rate base was inflated. u
Apparently, however, he said, there
was imitation by Sl,055 ,000-the
amount of the appraised value of
land holdings in excess OF the actual
cost.
1t was to his great surprise" he
said, that he found the other PUG
commissioners had voted against
postponement of the hearing.
IF we start the hearing Tuesday,
he said, lit will be evident that we
will not be able to have a full ano
fair hearing. 1t will be only per-
tunctory and the public interest
will not be protected. He added
ouickly-"unless we hold a piece
meal hearing
To this extent he agreed it was