Evening star., 1954-11-18
Expert Bolsters
Pepco Plea for
Rate Increase
1l% Ruise Fair
To All Customers,
ConsuItont Says

Inc POTOMAC Electric Power
Co.'s request to increase its gross
revenues by $5,785, 600 q year
was backed by an expert witness
at today's session of the rate
hearing.
He was Leo Loeb. senior part
ner Of the consulting firm of
Loeb & Eames. New York, final
witness in the company's direct
presentation on its needs for
higher rates.
After his testimony, the hear
ing was recessed until January 4.
The law firm specializes in
engineering and in the manage
ment Of public utilities in the
electric and gas fields.
The proposed additional gross
revenues are not out of line In
view of the company's recent
financial history, its need for
additional equity money and
presently expected construction
expenditures, Mr.. Loeb testified.
Proposed Rates Called Fair.
He said also that in his opin-
ion the proposed rate schedule,
which the company estimates
would increase the electric bills
of its Washington area customers
about IL per cent. were fair and
reasonable.
The witness said he believed
the schedules would provide
equitable treatment for all
classes of the company's custom
ers, and that they would yield
from District business no more
than it's fair share of revenues
in relation to the system-wide
rates.
In designing. constructing and
operating its electric system to
serve its customers, the company
has had to think, plan and act
on the basis of a single, closely
integrated electric system, Mr..
Loeb testified.
He added that his studies in
dicated that "the political boun-
daries are in fact only lines on
a map and do not. in themselves,
reflect any differences in operat-
ing conditions or circumstances
pertinent to rate fixing"
Systemwide Basis Favored.
He expressed the view that any
attempt to fix Pepco's rate on
other than a system wide basis
would be wholly unrealistic and
contrary to the essential inter-
ests Of the single metropolitan
community"
AS to. the need for increased
revenues, the witness declared
that "Pepco must have the dol
lars Of additional revenue that
it has requested In order to keep
its head above water"
He said that the company has
operated for a considerable time
with depressed earnings, with
the result that it has become un-
able to obtain new money on q
satisfactory basis and has been
required to postpone portions Of
its construction program.
This earnings situation can.
not continue for very long with
out a substantial adverse effect
on the financial standings and
credit of the company" Mr.. Loeb
said. I'm time this might lead
to so limiting the construction
program as to result in a decline
in quality of service"
Main Completes Testimony.
Earlier today. the Public Utili.
ties Commission heard the COM
pletion of direct testimony BY
H. F. G. Main, the company's
rate engineer.
Mr.. Main testified at some
length on the results of a study
indicating that the proposed new
rate when applied to District
business would produce no more
than its fair share of system .
wide revenue.
He testified in his opinion there
was no necessity for an alloca-
ton study for the commission
to approve, for application to the
District, rates designed for uni.
formed application throughout
the territory served by Pepco.
He said he nevertheless, as an
additional aid to the commits
sion, made such a study to
separate the fair share of sys-
tenn properties. cost and reve-
nues for service within the Dis
trict from those for other
service.
He said the study indicated
that if the proposed rate had
been in effect during 1853 the
company's overall rate of re-
turn would have been GAL per
cent on the rate base, with the
returns from District business
6.49 per cent and from non-
District business 6.22 per cent.
Another Approach Favored.
But, he said, comparison Of
the dollar difference between
the actual return earned and
that obtained by applying the
system rate Of return to the
rate base allocated to the Dis
trict was more significant.
The study showed. Mr.. Main
said, that revenue transfer Of
approximately $250,000 or less
than half of l per cent Of total
revenue would be required to
equate the District rate of re-
turn with that of the District
and the non-D District business.
Arthur B. Hanson was granted
a permission for limited inter-
yention in the proceedings on
behalf Of Safeway Stores, Inc.
He requested information from
the company on its other high
voltage customers. The company
agreed to furnish figures with
out identifying the customers.
q d.s
8
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