Evening star., 1950-09-26
Pepco Declares
II Must Keep
Dividends Up
Cut Would Discourage
New Investments,
Rate Hearing Told

r. Roy Dunn, treasurer of the
Potomac Electric g. Power Co.,
testified today that the power
company had a moral obligation to
maintain present dividend pay
ments on its common stock.
Mr.. Dunn took the stand as the
Public Utilities Commission con-
tinued its hearings of Pepco's re-
quest for a $3.5 million annual
rate increase. He was cross
examined by lawyers for two of
Pepco's biggest customers, the
Capital Transit Co. and the Fed
eral Government. Both oppose
the rate increase because they
would have to pay a substantial
part of it.
Under questioning by John Kir-
by, attorney for General Services
Administration, the Federal Gov
ernment's housekeeping branch,
MFR. Dunn said he felt Pepco was
morally obligated to see that divi-
dends on common stock are at
least 80 cents per share. He added
that to reduce the dividends would
harm the company's credit and
make it difficult to interest inves-
tors in the stock.
Earnings 80 Cents a Share.
Exhibits produced by Pepco in
dicate that present earnings areI
about 80 cents per share of COM
mon stock-almost exactly the
amount of the dividend.
The company is basing its rate
increase request on the premise
that it needs additional earnings
in order to attract new investors
to the company-investors who
will be needed to finance an ex-
tensive building program.
Mr.. Dunn said there must be a
cushion" between earning power
and dividends in order to keep the
confidence of the investors.
Seeks Substantial Margin.
1--WE need a substantial margin
to show that dividends are fully
protected by earning power" he
said.
Raymond Sparks, Capital Trans
it attorney, began his questioning
just before luncheon recess.
Capital Transit stands to absorb
large chunk of the rate rise if
it is authorized. It would have to
put up an additional annual sum
of $661 900. representing an in
crease of 70 per cent over present
rates. The District government
also would get a substantially
higher bill.
Look Into Finances.
At yesterdays hearing. conspic-
uous for a. lack of the fireworks
that marked PUG sessions on the
subject last August, lawyers for
the opposition probed carefully
into Pepco's financial setup, as
stated to the commission in its
application for the increase.
From Mr.. Dunn, who came
to the hearing carrying his slide
rule. they drew admissions of GER
tain minor miscalculations in the
company's figures.
There was no indication, how
ever. that the power company was
getting ready to revise its overall
estimates of increased revenues
needed to meet rising operational
costs.
Government lawyers won
minor victory when one of the
company exhibits, supporting its
request, was ordered stricken
from the records by PUG Chair
man James H. Flanagan. The
exhibit showed graphically the
opinions of 81 anonymous "se-
curity analysts" polled by the
company to give what they be-
lieved would be a proper return
to Pepco on its total capitalize
ton. According to the statement,
the experts average opinion
worked out to about 6 per cent.
The chart was stricken after Gov
ernment and transit company
lawyers objected that the experts
could not be produced at the hear
ing for cross-examination.
Higher Than Estimate.
Earlier, Mr.. Dunn conceded that
company estimates for revenue
during the first half of this year
had been substantially under ac-
tual returns. The forecast, he
said, was for a net revenue of
$3,217,567 for the period, while
actual receipts totaled $3,559,583,
or difference of $342,016.
At the same time, he added,
estimates of expenses had been
slightly excessive. Lloyd B. Har-
rison, attorney for the PUG. asked
if it did mot follow that, if esti-
mates for 1850 were excessive, the
estimates for 1851 will also be
excessive?"
Mr.. Dunn replied he could not
speculate. but that the second
half of the present year might
bring the total expenses and re-
ceipts closer in line with the esti-
mates