Evening star. [volume] (Washington, D.C.) 1854-1972, 1943-02-20
Battle Indicated
AT Hearing on
Pepco Rates
Honkin Raises Issue
On Principle Behind
Sliding Scale
By DON S. WARREN.

A bitter battle over the basic prln-
ciples of the sliding scale plan for
annual adjustment of Washington's
power rates is expected at public
hearings beginning March 2 before
the Public Utilities Commission on
this years power rates. as a result
of issues raised by Gregory Hankin.
the commissions minority member.
At pre-hearing conference yes
terday, called to limit issues at the
hearings, figures on earnings we're
disclosed that indicated no possible
ity of rate increase for the ensuing
year.
On the contrary, demands were
made by Mr.. Hankin that COM
petent evidence" on numerous rate
making elements not at issue in for
mer Potomac Electric Power Co.
cases be presented by the company.
In addition, he offered 'for COM
parison" accounting proposals
which, if adopted. would call for
ASNoS I1AAo III SOiioullitl ldGCS.
Echo Of Gas Case.
In this regard, it was something Of
a repetition of issues raised by MIR.
Hankin in the sliding scale case Of
the Washington Gas Light Co.
last fall, in which he was outvoted
by the other two commissioners,
against the opposition of the OPA,
with the result the gas rate issue
now is in the courts.
His proposal, involving methods
OF depreciation, tax charges and
other major elements new to the
Pepco sliding scale plan, so aroused
A. G. Neal, Pepco president, and
company lawyers, they protested his
demands were Illegal since the
questions entailed were not stated
In the notice Of the pre-hearing
conference.
On this point, in which the conf
pany claimed Mr.. Hankin's sug-
gested 'revaluation" of the COM
pany property, PUG Chairman
James H. Flanagan said the COM
mission was not prepared to rule at
the moment and decision was de-
ferred. At the insistance of Mr..
Hankin, however, it was agreed con-
sideration would be given at the
formal hearings to the following
questions of proper charges to OPP
Grating expenses:
The amount of cash working cap
ital, proper allowance for materials
and supplies, proper handling of
depreciation accounts, how much of
company tax payments should be
| charged, the size of promotional
expenses, how much of officers SAL
aries should be charged to consum-
ers, bills for legal service, disburse-
ments for employe welfare, PEN
sions and association dues.
To Confer on Other Items.
AS to some of the more routine
operating charges, it was agreed
members of the PUG staff and COM
pany agents should confer to see if
they could agree on items, to avoid
lengthy testimony at the forthcom-
ing public hearings.
v. A. McElfresh, the PUG chief
accountant, who was principal wit
ness at yesterdays pre-hearing, said
that by strict application of prin-
ciples in past Pepco decisions he
had found the rate base Of the
company for the year ended last
December 81, was $101 ,476,692 and
that after considering operating in
come and operating expenses the
company had earned ST per cent
on this valuation or $297 ,157 less
than the initial rate of return
listed under the sliding scale plan.
He offered second table to show
that if Federal income tax rate
of only 81 per cent were permitted
to be charged to operating expenses,
to prevent war" taxes from being
passed on to the consumer, the
company would have earned last
year return of SAT per cent. This
would show $242,O19 available for
rate reductions this year.
Further exploring possibilities, Mr..
McElfresh presented calculations as
to what would happen if the PUG
should deduct from valuation figures
the differeptial between actual costs
and appraised values used in the
1924 consent decree for Pepco prop
critics which since have been retired.
Under such formula, he found
the company would have earned last
year return of 5.84 per cent, still
Sl50,l16 less than per cent return.
Using such formula but allowing
only a 81 per cent tax rate charge
against operating expenses, he
found there would have been re-
turn OF Sc per cent, leaving $685.
available for rate reductions this
year.
Hankin Asked Calculations.
1t was made clear that additional
calculations were made by Mr.. Nc
Elfresh at the request of Mr.. Ham
kin. Under these he figured the
book costs of plant, less deprecia-
tlon reserve account as shown on the
books, with depreciation accrual for
the past calendar year on "corpo-
rate" basis and full allowance for
FEDERAL income and excess profit
taxes, would show a return of 65
per cent with $393017 available for
rate reductions. And applying to-
this 81 per cent tax rate charge
against operating expenses it was
Inquired the return would be TAG per
cent, with $1,174,213 available for
rate reductions.
In response to this, S. r. Bowen
OF company counsel said he felt
the public wanted the sliding scale
plan continued, that the pre-hear-
ing conference had been intended
to limit instead of expand issues.
and that if valuation" matters were
to be involved this was not proper
under the call for the conference.
During this debate William K. Laws,
Of company counsel, said the COM
pany should be allowed six months
to prepare for a valuation case IL
that was what the commission pro-
posed to consider.