Evening star., 1942-02-28
Rate Adjusting
Plan Faces
Death Study
Honkin Says Sliding
Scale for Pepco Soon
To Be Considered
BY DON S. WARREN.

By DON S. WARREN.
Abandonment of the sliding scale
plan for annual adjustment of rates
of the Potomac Electric Power Co.
under which there have been rate
cuts .every year since the plan was
initiated, December 81, 1924-wi]l be
considered" by the Public Utilities
Commission at hearings to be held
'soon," according to an announce
ment today by Commission Chair
man Gregory Hankin.
While it was emphasized no men,
Der of the regulatory body as yet has
reached any final conclusion. the
mere official suggestion that aban-
donment of the sliding scale plan
was subject to consideration con-
stituted the most radical change
considered in more than 16 years.
This subject was listed as one OF
several reasons why the annual rate
adjustment of power rates had not
been considered, as usual, in late
January. Although there was rate
reduction last January amounting
to S338, ,324, Chairman Hankin said
that judging by figures compiled
either by the staff of the commission
or by the Pepco for the last calendar
year, there appeared to be no pros
pect of another power rate cut for
consumers for this calendar year.
On this point, the commission de-
clined to reveal figures on the power
company expenses and revenues OF
the last year, since these would be
involved in the forthcoming valua-
ton and rate hearing, the date for
which is to be announced soon.
Waited for Flanagan.
One of the reasons given for the
delay in the annual rate adjustment
was that the third member OF the
commission, James H. Flanagan,
had been nominated and only re-
Gently was confirmed by the Senate,
and Chairman Hankin said he had
thought, as a matter OF courtesy,
decision on such an important mat
ter should be deferred until after
he had taken Office.
AS further reason he said that the
entire membership of the commits
sion, since the last Pepco rate order
was issued, had been changed and
that he felt that since the present
members had had no experience in
deciding the operation of such a
sliding scale plan they should go
"very thoroughly" into all the cir
cumstances and not act "blindly."
The sliding scale plan was initi-
ated under the consent decree given
by the District Court as of Decem-
ber 81, 1924, ending 7-year battle
between the P. U. c. and the power
company over rates. Under that
decision, S6,000,000 impounded
fund was split more or less half and
half between the consumers and the
company and the sliding scale in
augurated. Many millions of dol
lars thereby have been returned to
power consumers in the form of rate
reductions, and advocates of the
plan have declared, in recent years,
that rates here compared "favorably"
even with the Tennessee Valley Au-
thority "yardsticks." However, recur-
rently there have arisen questions
as to the profits being made by the
North American co. as the owner
of the controlling interest in the
Washington Railway & Electric Co.,
which owns outright the stock of
the Pepco, as well as controlling in
terest in the Capital Transit Co.
Also those who have figured what
the North American Co. paid for
Wreco stock and figuring on divi-
dends in recent years, have calcu-
lated profits on this basis amounted
to huge sums.
Letter Explains Delay.
An official order has not yet been
issued by the commission regarding
the forthcoming hearing, but today
reasons for the delay in annual ad-
justment of rates were given by
Chairman Hankin in a letter to A.
G. Neal, power company president.
Mr.. Hankin said, in part:
"Since all three Commissioners
are new incumbents and none of us
has had any experience with the
sliding scale plan, thought that we
should at this time examine more
carefully into the operations of the
plan and determine for ourselves
whether it is of benefit to the utility
and to the public and should there
fore be continued. or whether we
should adopt some other basis of
rate making, should it appear, upon
analysis of the facts, that the slid
ing scale plan is not advantageous
to the utility and to the public. =
ut seems to me that in deciding
whether one method of rate making
or another should be followed, we
should also consider carefully vari-
Gus questions which have presented
themselves in the course of our pre-
liminary study. For example in
connection with the computation of
the rate base, we note that large
amounts have been allowed for
working capital and for materials
and supplies.
These amounts may be perfectly
proper: nevertheless, we ought to
develop the facts and base our con-
clusions upon the facts. Also, in
connection with the rate base, there
is an annual adjustment of 1941 re-
tirements of plant included in the
1924 rate base to 1924 rate base
values. (The consent decree fixed
the rate base as of December 81,
1924, at about $32 SOC, 900, and as of
1910, including additions since then,
this had been raised to nearly $685.
000,00O)
IN view of the fact that recently
this commission and the Federal
Power Commission have found that
the actual original cost of the prop
erty of the power company, as of
December 81, 1886, was $63, 900 900, a
question has arisen whether that
would not have an effect on the
amount of adjustment of the above
stated retirements (of physical
properties in the power company
properties, worn out in service and
subject to replacement out of funds
contributed by power consumers)."
Raises Salary Issue.