Evening star., 1945-07-19
Transit Rates |
Termed Fair I'M
VaIuationRuIind
PUG Sets Cost Base
At $31,849, ,279
After Depreciation
BY BAINBRIDGE CRIsT.

BY BAINBRIDGE CRIsT.
The Public Utilities Commission
announced today that after an in
vestigation it had found the present
fares in the areas of the Capital
Transit Co. "fair, reasonable and
nondiscriminatory."
The commission made its state
ment in a decision on the rate and
hearings of the transit
company which were held in March.
While the decision left the fare
structure unchanged, 1t established
a deprecated original cost rate base
of $31 ,849,2 for 1914. The COM
said the original cost Of
property on December 81, 1943, was
SAG, 1877 1858 before making allowances
for depreciation.
Throughout the hearings e. Bar
rett Prettyman, attorney for the
company, contended the origiI al
cost should not be adopted as the
rate base, maintaining that the
property accounts of the company
showed a value of approximately
$50. .000, 900 by the end Of 1943.
Commission Cites Earnings.
The company explained that the
difference between the original cost
of its property and the recorded
cost arose because at the time Of
the merger of transit firms in 1888
forming the Capital Transit Co. the
fair market value of the property
was higher than when 1t was first
devoted to public service.
In upholding the present fares
the commission said that it was
Influenced by the company's past
earnings history, coupled with the
many uncertainties facing the COM
pany with respect to postwar op-
eratiors."
One Of the uncertainties cited was
the effect on the revenues of the
company of the recent Supreme
Court decision upholding the order
of the Interstate Commerce Com
mission requiring the transit COM
pany to furnish bus transportation
to the Pentagon on District fares.
Saying that it was taking "judi-
cial notice" of the courts decision,
the commission said that "it Is
obvious that it will result in a re-
duction in the operating income Of
the company" 1t was pointed out
that gross revenues from the Penta-
gon operation amounted to S267, ,408
during 1914 and that decrease in
gross operating revenue of at least
that amount can be expected dur
ing the year beginning last Mon
day, when the ICC order went into
effect.
"It is doubtful" the commission
said, that the company can main
tain its business or earnings at pres
ent levels. Various factors, such as
increased automobile travel upon
the easing of the present emergency
restrictions, decrease in the num-
Der of employees in Government
service, and improvement in its
manpower situation, which will per-
NIT full use of presently idle equip
ment and restoration of normal
loading standards will have
an adverse effect.
THE commission also has In
mind the arbitration proceedings
presently being conducted with re-
spect to wage increases sought by
the employees of the company. The
record shows that a proposal made
by the company, which would entail
increased expenses of approximately
$40O, 900 annually, has been rejected
by the employees"
Practical Basis.
In discussing the justification for
deprecated original cost rate
base, the decision stated:
"The commission concludes that
the fair value of the property of the
Capital Transit Co. for rate-making
purposes is its original cost when
first devoted to public service, less
accrued depreciation.
"The use of such rate base in
determining rates, coupled with q
rate of return promised on the cost
of borrowed capital and reason
able return on equity capital affords
a practical and equitable basis for
balancing the interests of investors
and patrons of the utility, which Is
the essence of the rate = making
problem.
Further, rate base predicated
on deprecated original cost is one
that can be readily determined and
brought up to date without resort
to costly and time consuming in
vestigations.
Fund Hearing Later.
The commission found that the
difference between the original cost
and the recorded cost at the end of
1943 was SIS, 3,136,8S9 and that this
amount could not be considered as
part of the rate base for the pur-
poses of calculating the return
which the company should be al
lowed on its property.
Last April the commission ordered
$13 100000 of the property accounts
of the transit firm set aside in an
unclassfied account. A hearing will
be held later on the disposition Of
this amount. In March, a commits
sion witness recommended three
methods of disposing of the $13, 100,-
900: BY amortizing it against that
income for period of years, by
writing down the par value of COM
mon stock or by amortizing it from
operating income.
The commission also set the de-
probation reserves for the end of
1943 at $14,785,070 1t said that this
amount was deficient by more than
100000 and that the company,
beginning with the year 1914, should
increase its annual allowances for
depreciation by 100000 a year.
The order for the investigation
into rates. valuation and deprecia-
ton was issued In I943.