Evening star., 1944-08-21
FWA Assai1s
Pepco Earnings;
Calls for Slash
Petition Declares
PUG Order Erred
On Is Points

=
day charged the Potomac Electric
Power Co. with excessive and "un-
considerable earnings" in filing a
formal request with the Public
Utilities Commission for a recon.
sideration Of the PUG findings,
opinion and order issued after re-
cent electric rate hearings.
The request came after a similar
petition filed Saturday by the
Treasury's Procurement Division,
which asked a~reduction of at least
81, 100000 annually, in place of the
$l,037, ,l89 ordered by the PUG. The
FWA petition requests a reduction
of at least $500 900.
In setting forth 13 points, in
which they said the PUG decision
erred, Alan Johnstone, Joseph
Guandolo and George w. Meutn,
FWA attorneys. said the utility
company could not be permitted to
earn profits on investments made by
the company with moneys repre-
senting excessive earnings involun-
tarlly contributed by rate payers.
Where the company's excess re.
turn has been invested in new prop
erty," the petition stated, "the con-
sumers have actually paid for tho
property, and to require them to paw
return on its cost makes them pay
twice"
Petition Cites Error.
The petition also said the commits.
sion erred in failing to exclude the
earned surplus from invested capital
In the cost-of capital computation
OF the rate OF return, and in failing
to exclude from the rate base the
cost OF property used and useful in
serving Maryland consumers and
special contract consumers over
which the commission has no juris-
diction.
The FWA attorneys also declared
the Commission should have cam
celled $3,755,0OO worth of "watered"
common stock of the Anmpanv and
eliminated such stock from its cap.
italiZation.
among other things, the FWA Pc
tltlon declared the 51a per cent
basic rate Of return allowed by the
PUG conf1icted with its own find
1ngs that overall cost of invested
capital was 5.3l per cent. More
over, 1t said, the rate of return al.
lowed was not 51a per cent but 5.82
! per cent. A basic return of Az per
cent would be fair and reasonable
10 both the company and rate nav.
ers, it contended.
Income Detailed.
The commissions rate reduction
OF Sl,o37 ,189, plus estimated savings
IN taxes resulting from that reduc-
ton, still would leave Pepco with
net income for 1943 of S3,645, ,o93.
the petition claimed. This, it said.
would provide return of 8sl per
cent on common stock equity after
olVloends on outstanding preferred
STOCK had been paid. After provid-
ing a per cent return on preferred
stock, the remaining 1926 .093
would, according to the petition.
provide as follows:
Earnings of $62.82 on each share
OF common stock of $l0O par value.
exclusive OF the stock which the
commission has determined did not
represent an investment in the util-
lty business. OF the outstanding
common stock of 100000 par
value, only s5,245 900 represents an
investment in the utility business.
Earnings of s36.61 on each share
OF Sl0O par value of the $1,000 900
common stock now outstanding,
Another Error" Listed.
FWA said the commission also
erred in establishing a rate base
which does not reflect the deduction
OF the full accrued depreciation,
and IN perpetuating the existing in
centlve provision in the sliding
scale arrangement which permits
Pepco to retain all earnings in ex-
cess OF the basic rate of return and
provides for a rate reduction in the
following year amounting to only
so per cent Of excess earnings be.
tween 5l2 per cent and 8A per cent,
The commissions findings, the
petition declared, are not supported
by evidence and are unreasonable,
arbitrary and capricious, contrary
to law, including the Public Utilities
Act, and permit the establishment
by Pepco of unlawful and unreason-
able charges for its services and tho
perpetuation of excessive earnings
and profits to the prejudice and
detriment of the consumer"
Pepco last Friday filed suit in
District Court, asking that the rate
reduction order be vacated after a
previous appeal to the PUG for a
reconsideration of its order had been
denied.