Evening star., 1946-07-28
Court Victory Leaves
Headache for PUG
Revision of Sliding Scale Plan
Might Avoid New Confusion

By John w. Thompson, Jr.
The recent Court Of Appeals decision
ended in favor of the Public Utilities
| Commission the two-year legal attack
| by both the Potomac Electric Power
Company and the Federal Government
| on the commission rate order Of 1914
But it also leaves the PUG with knotty
problem of what to do next.
What happened is this: In accordance
with the law and the so-called sliding
scale arrangement between the commits
sion and the company, the PUG an
nually conducts rate hearings in which
| 1t investigates the financial return OF
the company for the previous, calendar
| year in relation to an authorized rate
| Of earning. If the income is more than
| the authorized rate, at least half of the
excess is applied to the rates for the
| following year in the form of lower
schedules approved by the commission.
| If less than the authorized rate is
earned, the company could seek raise
IN rates. The rates are effective from
March l annually.
In July of 1914, the commission issued
an order, based on company income for
ls43, that $l037.0 900 should be returned
| to the consumer in rate reductions be-
| ginning March 1914. The order further
reduced the authorized rate of return
from to 5h per cent and made this
rate apply to deprecated instead of
an undepreciated plant value base. No
detailed schedule Of how this 81 .037 900
should be distributed was ever approved
by the commission because the order
was Immediately contested
Pepco succeeded in enjoining the ef-
fective date of the order, challenging
the amount of reduction as excessive
and also the right of the commission
to modify the sliding scale Arrangement
without company consent
TIE Government however, also at
tackled the decision on the opposite
ground that the reduction Vas too small.
1t challenged the validity OF the sliding
scale arrangement both in inception and
IN interpretation>by the PUG.
PUG won decisions in District Court
and both went to the Court of Appeals
which has now announced its decision
out as yet issued no written opinion.
Because of the litigation. the 1914
rate order could not be put into effect
with the result that, at the present
moment, consumers are paving 1s43
rates oased on company income in 1942.
Against the possibility that the COM
mission might be sustained. however.
the company laid aside a reserve an
nually for the past two years which 1t
estimated would cover reductions to
consumers on the basis Of the 1914 order
The crux of the present problem Is
that although the PUG called a rate
nearing in the spring of 1945 to in
vestlgate Pepco earnings for 1914 it
ADJOURNED the session without taking
testimony because of the still pending
litigation on its earlier order. Thus
there has been no official financial in
Vestlgatlon OF the company for that year,
Again. this year, hearing was called
IN advance of the court decision but
although testimony was taken of COM
mission staff findings, the company
challenged the validity of the hearing
and made no case. This could, of course.
be remedied by reconyening this hear
ing but the year 1914 Is less easily
disposed of.
The 1914 order is sustained. The
next step is to give effect to the reduc-
ton by means of a new rate sched-
ule. But should this be effective onlv
for the rate year 1914 with a new study
OF company income under this order
and revised rates for l945? Or should
the 1914 rate be carried through to date
and new schedule issued for 1916?
This is the commission dilemma. Which
would be fairer both to the consumer
and to the company alike?
II no substantial money is involved,
obviously it would be simpler to carry
through to the present On the other
hand, If company excess earnings in
1914 would have been considerable, even
under the reduction order the restudv
would be to the interest of the con-
sumner in still lower rates for last year.
Even if a considerable sum is in
volved there is the third possibility
that the company might prefer to re-
turn this in the form of an actual re-
fund against bills computed at the
1914 rate rather than keep constantly
adjusting rates up and down for a
period that is now past
This procedure Is not contemplated
in the sliding scale arrangement but
might be worked out Jointly by the
commission and the company If II
seemed the best.
What the commission is going to do
about it however will probably remain
a secret at least until after the text Of
the Court of Appeals opinion gives it
chance to see the exact extent OF
its legal victory.
But whatever the outcome of thi,
particular set of circumstances one
positive consequence might we'll be q
re-eXamination of the sliding scale
nciple-adopted by consent decree
in 1s25-by all parties to the arrange
ment with a view to redefning il
in precise terms.