Evening star., 1943-04-23
Mr.. Hankin's Figures
On Pepco Rate Cut.

To the Editor OF The Star:
During the recent gas rate hearings
there appeared several editorials in The
Star, criticizing my views and culminat-
ing with the suggestion that the case
should be taken to the court. When
Justice Let's vacated the rate order on
the ground that the Commissions action
was arbitrary and illegal" The Star was
the only paper which editorially pointed
out that my views were sustained by the
court Such show of editorial fairness
deserves commentator.
1t is because of this incident that I
think you would not want your readers
to be misled by news item in last We'd
nesday's Star to the effect that thought
Potomac Electric Power Co. rates for
1943 should be reduced by $4943 900,
culated that the near s5.00o,OOO cut pro-
posed by Mr. Hankin for the new year
would considerably exceed the actual net
income of the company in the last call
endar year. This left the impression
with the readers that my proposal would
not afford fair return to the company
and would be confiscatory.
Whoever these anonymous experts
are, it is evident that they do not know
what they are talking about, if their
views were correctly reported.
First. A reduction from gross revenue
in one year cannot be measured by the
income of the preceding year Further
more, I specifically stated that if the
reduction is to be measured by the income
for 1912 the rates should be reduced by
s2,874 900, not by $4,943 900.
Second. think that your readers are
entitled to know the actual facts and
figures and not be guided by opinions Of
experts" of unrevealed identity. A con-
servative estimate of Potomac Electric
Power Co.'S gross operating revenue
for 1943 at the present rates is S22.-
874,000, which, if reduced by $4943 900,
would be s17,931 900. A liberal estimate
of expenses for 1943 is SIC, 1863 900. which
would leave $756S. 900 for depreciation,
taxes and net operating income For
reasons which will be set forth in my
opinion, a liberal allowance for depre-
citation expense is 81 ,377 900. Taxes other
than Federal income taxes are $2326. 900.
Federal income taxes are estimated at
1911 900, Of which $89 900 should be borne
by the company as its share of the war
burden. This leaves $3563 900 for net
operating income for rate purposes.
Again for reasons which will be set forth
in my opinion, this is a return of over
6 per cent Of the proper rate base, and
If it Is considered that $500 600 has ale
ready been earned for 1943 as one-half Of
excessive profits in 1912, under the slid
ing-scale arrangement, the reduction Of
s4,943,000 would leave return Of 7.6 per
cent. GREGORY HANKIN.
Commissioner.
Editors note: The reporter used
the term experts" In good faith, re-
ferring to employees of the commits
sion who furnished him with the net
income figure of the company in re-
sponse to his request for the informa-
tion. The a S43, coo figure was used in
connection with the net income figure
for purpose Of comparison, not to
imply that the $4,943, 900 would come
out OF company net earnings.
The reporter failed to state, how
ever, that the $4,943,000 figure was
based on estimated revenue for 1s43.
Mr.. Hankin's statement In the rec
ord was as follows:
I should like to state for the record
that in joining with the commission
IN the direction that the company