Evening star., 1944-07-22
Electric Rate S|ashed
S1,037,189 by PUC;
Sliding Scale Changed
Return Ordered Cut
From 6 to S. Pct,
Retroactive to March
BY CAMBRIDGE CRIST.

III tle mOSt OFdStlc electrlc
rate reduction since the inau-
guration of the sliding scale in
1925, the Public Utilities Com
mission today ordered a slash of
81 ,037, ,l89 for this year and
reduced the Potomac Electric
Power Co.'S rate of return from
6 per cent to SIS per cent.
The company has been directed
to f4e new rate schedules within
30 days to effect this reduction,
which will be retroactive to March !.
Making substantial changes in
the present sliding-scale arrange
ment with Pepco, the PUG ordered
"a change from the present unde-
preciated rate base Of approximately
sl05, 900 900 to a deprecated one of
$50. til, ,7ls.04.
II the terms Of the sliding scale
had not been modified by the PUG,
this years reduction in rates would
have amounted to only $390.574, ac-
cording to figures presented during
the hearings by V. A. McElfresh,
chief accountant.
Cuts Working Capital.
In reaching its figure for the de-
preciated rate base, the commission
used the figure of sl7,844, ,120.48 for
depreciation eliminated S5,58l,714,
which represented the amount in
the present rate base in excess of
the original cost of property, and cut
out cash working capital amounting
to more than 100000.
In setting the rate OF return, the
PUG said the reduction of 05 per
cent was predicated largely upon
studies of the cost of capital pre-
sented during the rate hearings,
which began February %.
Depreciation will be calculated at
the rate of 27 per cent a year of
the cost of depreciable property.
This method, the PUG pointed
out, will eliminate the present
controversial arrangement which
credited consumers with 4 per cent
interest on depreciation allowances.
Would Continue Policy.
The largest previous yearly cut in
rates under the sliding scale was in
1881, when rates were reduced by
1851 ,023.
The commissions order said that
the sliding scale principle OF annual
rate adjustment should be con-
tinued, but with substantial modifi-
cations. During the recent hear
ings, Alfred G. Neal, Pepco presi-
dent, stated that if the rates of
return were materially reduced he
would strongly urge the Board of
Directors to withdraw from the
sliding scale.
The PUG said its decision set the
rate base of the power company
at the original cost of property
devoted to public service. In elimi-
mating cash working capital from
the rate base, the PUG explained
that study of the lag between
the payment of expenses and taxes
and the collections of revenue indi-
Gated 1t was not necessary to pro-
vide the company with such an
allowance.
Below Demands.
The PUC's slash in rates is con-
siderably below that demanded by
the Federal Works Agency and the
Procurement Division of the Treas
ury, which sought reductions rang
ing from $3,650,000 to $3.50, 600
Gregory Hankin, whose term on the
commission expired June 80, had
advocated a 5000, 1000 cut in gross
revenues.
During the hearings, Pepco argued
for retention Of the 6 per cent rate
Of return, which has been in effect
since 1887. The original rate of
return under the sliding scale was
rs per cent.