Evening star., 1946-04-11
S576,104 Pepco
Rate Cut Is Due,
Kosh Contends
U. S. Utilities Expert
Says PUG Figures
Favored Company
BY John w. Thompson. Jr,

A refund of S576,10 in rate reduc-
tions is due consumers of the Po-
tomac Electric Power Co. ON the
basis OF l945 company earnings, a
Treasury Department spokesman
yesterday contended before the Pub
lie Utilities Commission as the an
nual electric rate hearings came to
a conclusion.
This compared with S486, 900 which
the commission earlier indicated it
found available for rate reduction.
David A Kosh, chief CT the
utilities section of the procurement
division, told the commission it had
used a tax rate favorable to the
company in reaching its figure of
expected tax savings included in the
$486O0o.
The hearing was held this year
despite a still pending court chal-
lenge OF the commissions 1914 rate
order which reduced. Pepco's auth
orized earnings to 512 per cent of
deprecated rate base from q previ-
Gus per cent of nondepreciated
base and called for $l,0370 900 to be
sreturned to consumers in reduced
rates. Both Pepco and the Treas
ury attacked the order for differ
ent reasons and the case was heard
Monday in the Court of Appeals.
Exceptions Noted.
Although Pepco counsel, S. R.
Bowen, stood by, the company re-
fused to take any part in the pro-
ceedlngs on the grounds they are
Illegal until court action disposes of
the injunction against the 1914 rate
schedules. Mr.. Bowen, however,
noted exception to all testimony
taken. District consumers are now
paying 1943 rates based on company
earnings in 1912. No testimony was
taken last year because of the pend
ing litigation.
Mr.. Kosh told the PUG that in it's
contested order of 1914 it used the
figures of 1943 completely, including
the tax figures in effect during that
year. Under this policy, he argued,
the commission should use 1945 tax
rates i'll computing Pepco presump-
tive tax savings in 1916. v. A. Nc
ElfreSh, chief accountant for the
commission, had earlier testified he
had used the 1916 tax rates in COM
putting presumptive tax savings, al
though all other figures used were
of 1915.
The 1914 order, Mr.. Kosh said, pro-
vides "a set of rules by which the
game is played" While there is no
language compelling PUG to use the
tax rate of the year under considera-
ton, he argued, it was implicit in
the commission order Of 1914 which
used such rate.
Calls for Common Sense"
Don't we use common senSe?"
asked Chairman James H. Flanagan
of the commission. "We know the
tax law has been changed"
Mr.. Kosh further charged the
PUG cannot ignore" the rate year
1914, even though the court order
has stayed the rate schedules which
would have become effective March
l of that year. Under the con-
tested order, he said, on the basis
of PUG figures of Pepco 1914 earn
ings, the company would have had
$261 POT available for rate reduc-
ton and $4OS,865 for 1945-both of
these figures in addition to the
$1,O37,OoO ordered for 1914 on the
basis of 1943 income.
He also took issue with the
amount Pepco has set aside in a
reserve fund-s84C 600 in 1914 and
s1,Oe5 900 in 1874 in case the court
decision upholds the 1914 order.
The reserve s'lould be increased by
S45000O for 1914 and SS1 ,078, ,930 for
last year to bring the overall reserve
to some S3,464,000 He called this
reserve prepayment" of the Gus
toner to the company.
sliding Scale"
Electric rates are determined an
nually by the commission on what
is known as the sliding scale" ar
rangement. Under this arrange
ment, entered into by consent de-
cree in 1925, the company is au-
thorized a certain proportionate re-
turn. If it makes less, rates are
adjusted accordingly. If it makes
more, one-half of the additional
profit is turned back to consumers
in lower rates.
The Treasury Department., which
pays a $5,000,0oO Federal Govern
ment electric light bill, attacked
the 1914 order as insufficient reduc-
ton. The power company, on the
other hand, attacked the modifica-
ton of the sliding scale by the
commission in changing from a
nondepreciated to deprecated rate
base and the reduction of author
iZed earnings from to 51a ner cent