Evening star., 1946-03-21
CIarkSuggests
Plan 10 Clear
Wreco Inlpasse
Proposes Dissolution
Bon' Until Courts
Settle Rate Case
BY Don S. Worren

euSsCStcu To n Rouse subcommittee
way out of the impasse that was
developing over plans of the WASH
1ngton Railway &. Electric Co. to
dissolve in compliance with orders
OF the Securities and Exchange
Commission.
Involved in the proposals bv
Wreco, which is the holding COM
pany for the Potomac Electric Power
Co., is the requested use of $25 55OO.-
600 of its $29 100000 earned surplus
Tor capitalization purposes to mott
vate a series of stock exchanges as
Wreco dissolves.
The company had asked for
legislation to exempt the PROPOSED
transactions from prohibitions in
the La Toilette antimerger law be-
cause it found it could not comply
with the SEC order, otherwise.
Spokesman for the SEC and the
District Public Utilities Commission
had ndorsed the legislation but
determined opposition came from
the Federal Works Agency, which
claimed passage of the legislation
would prejudice its appeal on the
1914 Pepco rate case.
Oral Arguments to Begin.
Mr.. Clark's letter, addressed to the
Utilities Subcommittee of the House
District Committee, said he had no
objection to enactment of the bill
provided it was amended so as to
forbid actual adoption of the
Wreco dissolution plan until the
courts had finally passed on the
power rates and other issues.
Oral arguments on the rate case
are scheduled to begin next month
before the United States Court of
Appeals here.
Representative Harris, Democrat
OF Arkansas, the subcommittee chair
man, granted permission to the PUG
the SEC, Wreco and Pepco to sub
NIT statements commenting on Mr..
Clark's recommendations. The Har-
ris subcommittee is expected to
meet next week to act on the bill.
Interrelation Cited.
In his letter to the committee
the Attorney General commended
there was an interrelation between
the plan to dissolve Wreco and the
litigation over the rates and yalua-
ton OF Pepco because for one thing
the plan involved use of a substan-
tlal portion of the earned surplus of
Pepco.
The Government contends in its
appeal from the Pepco rate order
ne said, that much of the Pepco's
$2S,O00,000 surplus should be ex-
cluded from the valuation on which
customer rates were based.
Ine Government charges, he con-
tlnued, that the sliding scale ar
rangement under which Pepco rates
nave been adjusted since 1925 "yio-
lated" provisions of the District
code as to treatment of deprecia-
ton and that the construction placed
on the sliding scale plan by thePUC
resulted in improper increments to
Pepcos surplus at the expense of
company customers.
AS a result, the Government
claims that between 1925 and 1943
Pepco derived excess earnings"
amounting to approximately ST.
100000.
The effect of the amendment pro-
posed by Mr.. Clark would be to-
permit exceptions from the La Fol-
lette anti-merger law, as to stock
dividends and capitalization of
earned surplus, for the purposes of
the proposed reorganization only.
But if the reorganization plan were
approved by the SEC and the PUG
it could not be administratively
carried out until the courts had
rendered final Judgment.
Simplification Intended.
The amendment proposed by Mr..
Clark also would provide that any
appeal by the United States from
sany action by the PUG to carry
out the order of any court acting
on the issues also would bar final
adoption of the reorganization plan
unless the Attorney General certi-
fled he had no objection to the
reorganization.
The Wreco liquidation plan is one
part of proposals to carry out Sec
orders for simplification of the own
ership Of utilities here. The Sec
also has ordered the North Ameri-
can Co, giant holding company, to
diveSt itself Of its Washington hold
ings. 1t now has controlling in
terest IN Wreco and through it Of