the Washington Railway & Electric Co. and the Potomac Electric Power Co. I have not seen that agreement.

Mr. GIBSON. Which agreement is it that you have not seen?

Mr. CHILDRESS. I have not seen the agreement between the Washington Railway & Electric Co. and the Potomac Power Co. that they now have. It is supposed to be a very beneficial agreement to the Washington Railway & Electric Co.

In other words, it gets its power very cheaply. It gets it more cheaply than the Capital Traction Co. can manufacture its power at its plant in Georgetown.

4. Paragraph 11 should provide for a temporary rate base upon which the new company shall be entitled to earn a reasonable rate of return. Such rate base shall be established at $50,000,000 for all of the properties within and without the District of Columbia to be acquired by the new company, either directly or through stock ownership, which are used and useful for the convenience of the public, and such rate shall be increased by additions to such properties and decreased by retirements from use of such properties: Provided, however, That retirements of property brought about by the unification herein provided for or by order of regulatory authority shall remain in the rate base until amortized out of earnings. The said rate base shall remain in effect for a period of 10 years and thereafter until a revaluation is made.

Mr. GILBERT. Upon whose figures did you arrive at the $50,000,000 valuation?

Mr. CHILDRESS. The figures, of course, in this case were submitted to us in the hearings; that is, we had testimony before the commission, in the hearings, submitted by the representatives of the three companies.

In addition to that, the Public Utilities Commission, of course, has the original valuations of our predecessor commission, and our office as a matter of routine brings down every month all the betterments and increases that have been made in the various properties; that is, the various utility properties.

We had all the figures, of course, in our office, and we had the figures presented by the companies themselves.

Mr. GILBERT. Had your office of itself ever had an independent valuation made?

Mr. CHILDRESS. You may have misunderstood me. We, of course, had the original valuations. Those were made starting back in 1914 and extended over a period up to 1919.

Mr. GILBERT. My question is, Has your commission, since the Public Utilities Commission has been formed, made an independent valuation of its own?

Mr. CHILDRESS. Yes; the commission has made an independent valuation of all the utilities in the District of Columbia since the act was passed in 1913, but we did not make an independent valuation at the present time, if that is what you mean.

Mr. GILBERT. Upon what method did your commission make this

valuation?

Mr. CHILDRESS. You mean as to the $50,000,000?

Mr. GILBERT. Yes, sir.

Mr. CHILDRESS. I want to say in that connection that we did not go into a valuation at this time.

Mr. GILBERT. Is not that very important that one should be gone into at this time?

Mr. CHILDRESS. Speaking now for myself-I would rather speak for myself in this matter-I did not consider it necessary that a valuation should be had at this time.

Mr. GILBERT. Why?

Mr. CHILDRESS. A valuation is a very long and tedious process. It is a very expensive process. The whole benefit of this unification would be done away with if a valuation, a real valuation, had been gone into. It would take two or three years. It would mean expense of probably $300,000, and, of course, that delay would not benefit a merger at this time.

Mr. GILBERT. From whom do you get the facts that it would take that length of time and cost that much money?

Mr. CHILDRESS. Of course, that is merely an estimate, but the original valuation extended from 1914 up to 1919; that is, taking in all of them.

Mr. GILBERT. Has your commission ever consulted any of the experts in the bureau of valuation department of the Interstate Commerce Commission? Have you ever asked them what assistance they could render you in making an accurate valuation of this property?

Mr. CHILDRESS. No, sir.

Mr. GILBERT. I am informed that they are prepared to give a very accurate and scientific valuation within much less time than you mentioned; in fact, within a month or so, one of real value, and of a totally disinterested nature.

Have you made any investigation to see about that at all?

Mr. CHILDRESS. No, sir; not at all. In the public hearings, of course, we welcomed any information which we could get on that subject.

Mr. GILBERT. Are you yourself qualified to say that it would take three years' time and $300,000 to obtain this information?

Mr. CHILDRESS. No, sir; I am not personally. I am not an engineer and I have had no experience in valuations. I am only basing my estimate upon what has happened in the past.

Mr. Fisher has just informed me that the original valuation took three years and that this particular one cost $165,000.

Mr. GILBERT. By whom was that made? I remember having it before our committee on a previous occasion, but I have forgotten the facts.

Mr. CHILDRESS. At that time under the law the commission was authorized to employ competent experts and they employed a man named Doctor Beamis, of Chicago, who was a valuation engineer. He took general supervision of the whole question of the valuations of the various utilities here, and he had with him expert accountants and expert engineers, working under him.

Mr. GILBERT. The question of the valuation of one of these companies found its way into the courts, did it not?

Mr. CHILDRESS. Yes; there were two or three of them that found their way into the courts. The first one was that of the Potomac Power Co. They made that a test case.

Mr. GILBERT. When was that?

Mr. CHILDRESS. I am frank to say that I do not know. Mr. Fisher tells me, all of this, you understand, gentlemen, was before I was

connected with the Public Utilities Commission, and I am not familiar with the details of it.

Mr. GILBERT. One of the traction systems, in its entirety, found its way into the courts, did it not?

Mr. CHILDRESS. That was the Capital Traction Co.

Mr. GILBERT. When was that?

Mr. CHILDRESS. February, 1927, was the final decision.

Mr. GILBERT. What was the valuation of that company as fixed by the courts?

Mr. CHILDRESS. It was something under $26,000,000.

Mr. GILBERT. Was that used as a basis in fixing this valuation of $50,000,000?

Mr. CHILDRESS. If you will pardon me just a moment, I am giving you these figures roughly, purposely. I can get you all the records, but I thought perhaps you would rather have it approximately than have to wait for the exact figures each time with the delay of going through the papers, etc. If you would rather have them, I can have all these papers before me.

Mr. GILBERT. I want it approximately accurate.

Mr. CHILDRESS. That is approximately accurate.

Mr. GILBERT. Was the valuation fixed by the court on that company's property used as a basis for this valuation of $50,000,000 that was arrived at?

Mr. CHILDRESS. That was used in the broad sense as a basis of this compromise figure of $50,000,000.

Mr. GILBERT. Was it increased or decreased?

Mr. CHILDRESS. I do not quite understand.

Mr. GILBERT. It was either used or it was not used; which was it? Mr. CHILDRESS. I say that it was used in a broad sense. In other words, we took the valuation-I accepted personally the valuation which was fixed by the court in the Capital Traction Co. case. Based on the principles laid down in that case, we also made a tentative valuation of the Washington Railway & Electric Co. Those two added together produced a figure which was considerably in excess of $50,000,000.

Then, when these proponents offered this resolution and asked for an agreement and asked that $50,000,000 be fixed as a reasonable rate base, I accepted that in view of the fact that it was a compromise figure.

Mr. GILBERT. The claim was that the value of these properties was over $60,000,000, was it not?

Mr. CHILDRESS. That was the claim.

Mr. HAMMER. $62,500,000?

Mr. GILBERT. $62,000,000 and some fraction. Why was that reduced to $50,000,000?

Mr. CHILDRESS. I would rather not say why they chose to reduce it to $50,000,000. They did reduce it to $50,000,000 and submitted that figure to us.

Mr. GILBERT. It was a voluntary reduction on their part?

Mr. CHILDRESS. Yes, sir.

Mr. GILBERT. Did they give you any reason why they were willing to give the public $12,000,000 of their valuation free?

Mr. CHILDRESS. They expressed themselves in the record-I would rather not quote it accurately, because I might not have it exactly right. It is a matter of record, but the general tone was that they were anxious to have no issue raised as to a question of valuation at this time, and if they would submit an exact figure around what they thought the real valuation was, it would mean a valuation hearing and we did not want to enter into a valuation hearing at this time at all.

Mr. GILBERT. Why, in a matter involving as much as $12,000,000 would they rather make a reduction of $12,000,000 as a basis of valuation than take a little time?

Mr. CHILDRESS. As I said before, I would rather not express my opinion as to why they did that.

Mr. GILBERT. I should like to ask another question. This matter has been more or less under public discussion for 20 years, has it not?

Mr. CHILDRESS. Very close to that, I understand.

Mr. GILBERT. Why is there this great hurry right at this time to rush through a $50,000,000 valuation without giving this matter that has been pending for 20 years very exhaustive and accurate and competent valuation?

Mr. CHILDRESS. To be perfectly frank with you, I have no knowledge why they want it at this particular time. They stated in the hearings they were willing to make that sacrifice so that we would not have to go through the valuation, so that the thing could be attended to at this time.

Mr. GILBERT. If the public has been clamoring for this step approximately 20 years, and they have a valuation based upon a court proceeding that would fix the sum at over $60,000,000, does it arouse any suspicion in your mind that in order to get haste, they would make a deduction of over $12,000,000-in order to get immediate action?

Mr. CHILDRESS. To be perfectly frank with you, I do not consider they have exercised any great haste. You will recall that the records show that they did not take any action whatsoever until after they had been asked to do so by the Public Utilities Commission. I wrote them a letter last fall in response to, you might say, popular demand; newspapers and citizens' associations; every one wanted a merger, apparently. The merger, it was thought, would be a good thing for the city. I wrote a letter individually and asked them if they could get together and see if they could not bring about some form of merger agreement which would be acceptable to the commission and which the commission could recommend to the Congress.

In response to that letter they did have conferences, and as a result of those conferences they did get together.

Mr. GILBERT. I think your assumption is correct that you were well representing the people's wishes in asking for or expediting a merger. Yet, having been on this committee for some eight years I can not quite understand the attitude surrounding this desire for rapid action in view of the dilatory methods that have been pursued throughout all these years. I thought that maybe you could throw some light on that.

Mr. CHILDRESS. To be perfectly frank with you I do not believe that I am competent to speak on that. I would rather have the parties to this agreement tell why they did that. Frankly, I have gone on the assumption that they have acted in perfectly good faith; in other words, that they want a merger and believe a merger would be beneficial to the city. I have done everything I could to bring about a merger.

Mr. GILBERT. There is a part of the Interstate Commerce Commission that devotes its activities entirely to this character of investigation, the bureau of valuations of the Interstate Commerce Commission. That is the business they are engaged in every day, and they are equipped for it. Do you not think that it would be wise to suggest, or at least, invite their cooperation so that these companies may all be treated fairly, and so that we may get at a real valuation of this property?

Mr. CHILDRESS. I do not know whether that would work at the present time, because I think it has gotten beyond the point now where, so far as the commission is concerned, we could have any more testimony on it. I think that it would be perfectly proper for a committee of Congress to get any information that they could. Mr. GILBERT. That is all.

The CHAIRMAN. Proceed, Mr. Childress.

Mr. GIBSON. May I ask the gentleman a question?

The CHAIRMAN. Of course.

Mr. GIBSON. Of course, the company as merged would be entitled to a fair return on its investment. What is that fair return that is fixed by the courts here?

Mr. CHILDRESS. The only rate which has been fixed, so far as I now recall, by the courts is in the Potomac Power Co. case. That has been definitely settled, and is looked upon more or less as a guiding rate in Washington, although we have not had occasion to use any other. That is 72 per cent.

Mr. GIBSON. And you accept that as a ruling guide?

Mr. CHILDRESS. That is the only ruling guide we have at the present time.

Mr. GIBSON. Of course, the return depends upon the valuation of the property as fixed by the commission, or as fixed by the courts. Mr. CHILDRESS. Yes, sir.

Mr. GIBSON. But you have made no independent valuation to determine the value of these properties?

Mr. CHILDRESS. Not at this time.

Mr. GIBSON. Not for the purpose of this merger?

Mr. CHILDRESS. No, sir.

Mr. GIBSON. I think that you said that the Capital Traction Co.'s valuation was fixed at around $26,000,000. That was the valuation that was made in the three-year period to which you have referred. That is true, is it not?

Mr. CHILDRESS. That is true.

Mr. GIBSON. Is that the exact appraisal that you used in arriving at the total valuation, so far as that company was concerned?

Mr. CHILDRESS. We used that as a basis; in other words, we accepted that amount and put the Capital Traction Co. down as being worth that figure.