Potomac Electric Power Company (Pep-eo) has petitioned this court pursuant to D.C. Code 1973, § 43-705, to set aside as confiscatory the rates prescribed by the Public Service Commission of the District of Columbia (the Commission) for its retail sales of electric energy to District of Columbia customers. The rate rulings were established by a two-to-one vote of the *130Commission in Order No. 5739 on November 12, 1975. Re Potomac Electric Power Co., 11 P.U.R.4th 215 (PSC D.C.1975). Pepco’s request for reconsideration was denied by Order No. 5759 dated January 12, 1976. Concluding that the Commission arbitrarily and unreasonably set the company’s rate base at a level insufficient to allow Pepeo a reasonable opportunity to earn the rate of return which the Commission itself found to be just and necessary, we vacate the orders appealed from and remand for further proceedings.
I. PROCEDURAL HISTORY
On December 20, 1974, Pepeo filed an application for an increase in its retail rates. The application was based upon a calendar 1974 test year, and sought an increase of approximately $50,832,000 in gross operating revenues annually.1 Such additional revenues theoretically would have resulted in a 9.75% rate of return on the company’s 1974 year-end rate base. Following a series of postponements and delays, a prehearing conference was held on May 6, 1975. As an outgrowth of that conference, the Commission granted intervention to 13 parties, one of whom, People’s Counsel, is an intervenor on appeal.2 Twenty-two days of public hearings ultimately were held from June 4 through July 24,1975. On July 18,1975, Pepeo filed with its rebuttal testimony an updated test period reflecting actual operating figures for the 12 months ended June 30, 1975. Thereafter, further cross-examination was conducted, briefs were filed, and oral argument was heard by the Commission on September 3, 1975.
After filing its original application, Pepeo twice sought interim rate increases (by applications dated March 12, and July 3,1975) based upon (1) the adverse impact of accelerating attrition,3 and (2) the length of time which obviously would elapse before the Commission’s final decision. Both of those applications were dismissed summarily by the Commission.4
On November 12, 1975, the Commission issued its opinion and order. It (1) found an overall 9.1% rate of return to be reasonable and necessary, (2) authorized an increase in Pepco’s gross annual operating revenues of $27,657,000, and (3) determined the basic design of the new rates. Calculations pertaining to the revenue increase were based essentially upon a calendar 1974 test period. Commissioner Stratton vigorously dissented, citing the majority’s refusal to allow properly for attrition as the principal reason for the Commission’s failure to set rates at a level which would be sufficient to permit Pepeo the opportunity to earn a reasonable rate of return. 11 P.U. R.4th at 237-51.
Pursuant to the Commission’s opinion, Pepeo filed a new schedule of rates on November 7, 1975. Thereafter, on December 3, 1975, Pepeo petitioned the Commission for expedited review of those rates. The Commission approved the rate schedules on December 12,1975, to become effective the following day.
*131Also on December 12,1975, Pepeo filed an Application for Reconsideration of Order No. 5739. That was denied in all relevant respects by the Commission in Order No. 5759 on January 12, 1976.
On appeal, Pepeo accepts the 9.1% rate of return determined by the Commission, but charges that the Commission (1) arbitrarily refused to make use of the company’s most recent actual operating data of record for the test period (f. e., data for the 12-month period ended June 30, 1975) or, (2) in the alternative, failed to make adjustments to the calendar 1974 test period data for continuing attrition and for certain known changes of record which occurred during the first six months of 1975. Pepeo alleges that it thus was denied a reasonable opportunity to earn the rate of return found necessary by the Commission to maintain the company’s financial integrity. The Commission, on the other hand, defends its use of the 1974 test period and its limited allowance for attrition primarily by singling out two “reasons” for Pepco’s rapidly declining financial condition during the test year — the energy crisis (which led to reduced consumption) and a decrease in sales of electricity to a pool of interconnected utilities — and by stressing their irrelevancy to forecasts of Pepco’s financial needs. The proceeding now before us represents the fourth time in six years that Pepeo found it necessary to apply to the Commission for rate increases.
II. SCOPE OF REVIEW
In reviewing orders of the Commission in rate cases, our authority is delineated by D.C. Code 1973, § 43-706. It is limited to questions of law, and to findings of fact insofar as they may be “unreasonable, arbitrary, or capricious.”5 Congress properly has vested the Commission, not this court, with the primary ratemaking authority, although the Commission is bound both to exercise its powers rationally and lawfully, and to set rates that are “just and reasonable.” D.C.Code 1973, §§ 43-301, -401, —411; Chesapeake & Potomac Telephone Co. v. Public Service Commission, D.C.App., 330 A.2d 236, 240 (1974). These standards are the same as those embodied in the Natural Gas Act, 15 U.S.C. §§ 717c and 717d (1970), and the Federal Power Act, 16 U.S.C. §§ 824d and 824e (1970). See Washington Gas Light Co. v. Baker, 88 U.S.App.D.C. 115, 118-19, 188 F.2d 11, 14-15 (1950), cert. denied, 340 U.S. 952, 71 S.Ct. 571, 95 L.Ed. 686, appeal after remand, 90 U.S.App.D.C. 98, 195 F.2d 29 (1951).
The constitutional basis for requiring utility rates to meet the test of reasonableness derives from the Fifth and Fourteenth Amendments. Federal Power Commission v. Natural Gas Pipeline Co., 315 U.S. 575, 582, 62 S.Ct. 736, 86 L.Ed. 1037 (1942) (hereinafter Natural Gas Pipeline). The Supreme Court has held that rates which are not adequate to yield a reasonable return on the value of the property used by a utility company to furnish its service to the public are unjust, unreasonable, and confiscatory, and that their effectuation would deprive the utility of its property without due process or just compensation. Natural Gas Pipeline, supra, at 585-86, 62 S.Ct. 736; McCardle v. Indianapolis Water Co., 272 U.S. 400, 408, 47 S.Ct. 144, 71 L.Ed. 316 (1926) (hereinafter McCardle); Bluefield Water Works & Improvement Co. v. Public Service Commission, 262 U.S. 679, 690, 43 S.Ct. 675, 67 L.Ed. 1176 (1923) (hereinafter Bluefield).
Congress, however, has provided no formula for determining what constitutes rates which are “just and reasonable.” To fill that void, the Supreme Court has expanded upon the statutory standard in the Natural Gas Pipeline case and its progeny. It is axiomatic that to be “just and reasonable,” rates must be set at a level that permits the company to earn a fair rate of return on its investment. See Federal Power Commission v. Hope Natural *132Gas Co., 320 U.S. 591, 603, 64 S.Ct. 281, 88 L.Ed. 333 (1944) (hereinafter Hope); Natural Gas Pipeline, supra, 315 U.S. at 596-97, 62 S.Ct. 736; McCardle, supra, 272 U.S. at 408-09, 47 S.Ct. 144; Bluefield, supra, 262 U.S. at 690, 43 S.Ct. 675. While regulation does not guarantee that a utility will achieve its projected revenues, it must provide the utility with a reasonable opportunity to earn a rate of return sufficient to maintain the company’s financial integrity, to attract necessary capital at a reasonable cost, and to compensate investors fairly for the risks they have assumed, while protecting the relevant public interests. Hope, supra, 320 U.S. at 605, 64 S.Ct. 281. This involves a delicate balancing of investor and consumer interests. Id., at 603, 64 S.Ct. 281.
No single formula—or combination of formulas—limits a regulatory commission’s power to set “just and reasonable” rates. However, a commission is obliged to make pragmatic adjustments where appropriate circumstances exist. Hope, supra, at 602, 64 S.Ct. 281; Natural Gas Pipeline, supra, 315 U.S. at 586, 62 S.Ct. 736. Courts may intervene only upon a “clear showing” of a due process violation. If the commission’s order, viewed in its entirety, produces no arbitrary result, judicial inquiry is to be terminated. Natural Gas Pipeline, supra, at 586, 62 S.Ct. 736.
Thus, “it is the result reached not the method employed which is controlling.” Hope, supra, 320 U.S. at 602, 64 S.Ct. at 287. Courts are to concern themselves primarily with the overall impact of a rate order, rather than with the theories behind it. Ibid. However, if the total effect of a rate order is found to be unjust or unreasonable, a reviewing court must delve into the details of the order. It must give reasoned consideration to each contested element of the rate order “to determine the possible presence of arbitrary action.”6 Goodman v. Public Service Commission, D.C.App., 309 A.2d 97, 101 (1973) (hereinafter Goodman); accord, Telephone Users Association v. Public Service Commission, D.C.App., 304 A.2d 293, 298 (1973), cert. denied, 415 U.S. 933, 94 S.Ct. 1448, 39 L.Ed.2d 492 (1974) (hereinafter Telephone Users). See Permian Basin Area Rate Cases, 390 U.S. 747, 790-92, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968). Only in such a way may a reviewing court effectively evaluate the fairness and reasonableness, or the potentially confiscatory nature, of a particular rate order.
In the Permian Basin Area Rate Cases, supra, at 791-92, 88 S.Ct. at 1373, the Supreme Court summed up the responsibilities of a reviewing court:
First, it must determine whether the Commission’s order, viewed in light of the relevant facts and of the Commission’s broad regulatory duties, abused or exceeded its authority. Second, the court must examine the manner in which the Commission has employed the methods of regulation which it has itself selected, and must decide whether each of the order’s essential elements is supported by substantial evidence. Third, the court must determine whether the order may reasonably be expected to maintain financial integrity, attract necessary capital, and fairly compensate investors for the risks they have assumed, and yet provide appropriate protection to the relevant public interests, both existing and foreseeable.
This court has adhered to the standards of review thus enunciated on several occasions.7 In the instant case, we have examined the overall effect of the Commission’s opinion, and find it to be unjust and unreasonable in that it deprived Pepeo of the opportunity to earn a fair rate of return by improperly disregarding the latest relevant historical data of record pertaining to the company’s operations. Examination of *133the elements of the opinion reveals several findings and conclusions (expressed in the Commission’s opinion in an overlapping, narrative style) which are unreasonable, arbitrary, or capricious. These include the Commission’s refusal to utilize the most recent test period in the record, its failure to account for continuing attrition, and its refusal to recognize certain known changes which occurred after the originally proposed calendar 1974 test period.
III. THE OVERALL EFFECT OF THE COMMISSION’S OPINION AND THE RATE OF RETURN
Basic to Pepco’s arguments is the contention that the Commission effected an unreasonable and arbitrary result when it established a rate base — and thereby provided for revenues — that deprived the company of any opportunity to earn the rate of return which was found reasonable and necessary by the Commission itself.8 In its opinion, the Commission initially found “that a fair [overall] rate of return for Pepeo is 9.1%. ” It further concluded that:
In order to attract equity capital, a return on equity of 13% is required by PEPCO; and we find an equity return at that level to be fair and reasonable.
Notwithstanding those conclusions, by arbitrarily disregarding actual, historical, and uncontroverted data submitted as evidence by Pepeo during the extended course of the hearing, the Commission all but guaranteed that the company would not be able to approach earning the rate of return it authorized.
The process of ratemaking involves the making of an honest and intelligent forecast of probable future values based upon all relevant circumstances, including primarily known performance during a period of time in the immediate past (i. e., a test period). See West Ohio Gas Co. v. Public Utilities Commission (No. 2), 294 U.S. 79, 82, 55 S.Ct. 324, 79 L.Ed. 773 (1935) (hereinafter West Ohio Gas); McCardle, supra, 272 U.S. at 408-09, 47 S.Ct. 144; Missouri ex rel. Southwestern Bell Telephone Co. v. Public Service Commission, 262 U.S. 276, 288, 43 S.Ct. 544, 67 L.Ed. 981 (1923); Id., at 291-92, 43 S.Ct. 544 (Brandéis, J., concurring in the judgment); Telephone Users, supra, 304 A.2d at 297. The validity of the test period approach rests upon the assumption that the relationship among revenues, expenses, and rate base which were established in the test year will continue into the near future, when the prescribed rates will be in effect.9 See Letourneau v. Citizens Utilities Co., 128 Vt. 129, 259 A.2d 21, 24 (1969).
Accordingly, a valid test period must be based upon the utility’s most recent actual experience, with adjustments for all known changes affecting costs and revenues for the immediate future. Telephone Users, supra, 304 A.2d at 297; Southern New England Telephone Co. v. Public Utilities Commission, 29 Conn.Supp. 253, 282 A.2d 915, *134919 (Super.1971); Letourneau v. Citizens Utilities Co., supra, 259 A.2d at 23-24; see Boston Gas Co. v. Department of Public Utilities, 359 Mass. 292, 269 N.E.2d 248, 259 (1971); New York Telephone Co. v. Public Service Commission, 29 N.Y.2d 164, 324 N.Y.S.2d 53, 272 N.E.2d 554 (1971). See also Goodman, supra, 309 A.2d at 100. It is well settled that the rate maker may not rely on out-of-date information when more recent actual experience, which shows a substantial disparity between the earlier forecasts and the rate of return actually earned, is available. West Ohio Gas, supra, 294 U.S. at 82, 55 S.Ct. 324. Suitable adjustments must be made to accommodate the latest available relevant data which are received in evidence.
To shut one’s eyes to [the latest available figures] altogether, to exclude them from the reckoning, is as much arbitrary action as to build a schedule upon guesswork with evidence available. [Id., at 81-82, 55 S.Ct. at 325.]
See New York Telephone Co. v. Public Service Commission, supra (PSC reversed for refusal to reopen hearing to receive actual data which differed from projections).
A. The Most Recent Available Data
Pepeo submitted to the Commission clear and uncontroverted evidence of its rapidly declining financial position on several occasions during the HV2 month period between the filing of the original application and the issuance of the Commission’s opinion. In its application, Pepeo first based its rate request upon a calendar 1974 test period, but it also forecast its operating results for 12-month test periods ending March 31, 1975, June 30, 1975, and December 31, 1975.10 When filed, those projected figures were not nearly as high as those later found to be required by the Commission, and actual experience proved them to be unduly optimistic. See West Ohio Gas, supra, 294 U.S. at 82, 55 S.Ct. 324. The forecasts, as well as the actual, historical data submitted by Pepeo, reflected continuing attrition; that is, a chronic inability on the part of the company to earn its authorized rate of return because the increases in its expenses and/or rate base consistently outpaced its increases in revenues.11
The Commission further was alerted to the dramatic effects of continuing attrition on the utility when Pepeo filed two requests for interim rate relief, subject to refund, pending the Commission’s final opinion. The company filed the interim requests with a realization that its financial position was declining rapidly during the interval which was occasioned by administrative delay. As noted, the interim applications were filed in March and July of 1975, respectively, and were accompanied by updated direct testimony and exhibits reflecting a continuing deterioration in operating results. As we have noted, the Commission denied those applications.
Cross-examination with respect to Pep-co’s direct presentation began on June 4, 1975. The company’s witnesses pointed out the severe attrition which had been experienced by Pepeo since the end of 1974, and demonstrated that the test period originally proposed had become irrelevant to the company’s actual financial status.12 The princi*135pal Commission Staff witness, while adhering to the calendar 1974 test period, also recognized and deplored the continuing presence of attrition.13
Pepeo then prepared a compilation of actual operating results for the 12 months ended June 30, 1975. That submission was filed on July 18, 1975, with the company’s prepared rebuttal testimony. That filing was made during the cross-examination of the witnesses for the Commission’s Staff and the intervenors. The cross-examination of Pepco’s rebuttal witnesses began on July 23, 1975.14
Pepco’s presentation of the updated test period data was in the same format as had been utilized in its original application (filed on December 20, 1974), and as it thereafter had been amended to show actual 1974 results. Only the numbers were changed to reflect the significant intervening alteration in Pepco’s financial status due to continuing attrition.
As part of this presentation, Pepeo introduced into the record the following table of actual results of the company’s operations:
Earnings Per Ratio of Return on Share of Earnings Average Common to Fixed Common Stock _Stock_Charges Equity Capital
Year
1968 $1.35 2.94x 10.5%
1969 1.09 2.28 8.3
1970 1.25 2.10 9.1
1971 1.33 2.10 9.4
1972 1.53 2.58 10.5
1973 1.71 2.70 11.4
Twelve Months Ended
June 30,1974 1.87 2.81 12.3
July 31,1974 1.86 2.74 12.2
August 31,1974 1.78 2.63 11.7
September 30,1974 1.76 2.56 11.5
October 31,1974 1.72 2.51 11.3
November 30,1974 1.70 2.47 11.1
December 31,1974 1.63 2.43 10.7
January 31,1975 1.57 2.36 10.3
February 28,1975 1.52 2.30 . 9.9
March 31,1975 1.44 2.20 9.5
April 30,1975 1.32 2.09 8.7
May 31,1975 1.24 2.01 8.2
June 30,1975 1.21 1.90 8.1
*136any acceptable terms.”15 Characterizing Pepco's position as “critical,” he continued:
Pepeo has clearly begun to lose [investor] confidence and the loss will accelerate unless the Company is able to obtain the rate relief sufficient to achieve the level of results required to enable the Company to retain present and attract potential investors in its securities.16
No substantial objection to the content of Pepco’s rebuttal testimony was made, and no issue was raised concerning the calculation of the rate base utilizing the actual data for a test year ended June 30, 1975.
Subsequent to the hearing, Pepeo supplied for the record its financial results for the 12-month periods ended July, August, and September of 1975 as they became available:
Return on Earnings Average Per Ratio of Common Share of Earnings Stock Common to Fixed Equity _Stock_Charges Capital
Twelve Months Ended
July 31,1975 $1.21 1.90x 8.1 %
August 31,1975 1.18 1.90 7.9
September 30,1975 1.16 1.89 7.78
Finally, in its brief, oral argument, and petition for reconsideration before the Commission, the company repeated its need for greater rate relief than that afforded by rates based upon the outdated calendar 1974 test period.
B. The Commission’s Exclusion of the Most Recent Available Data
Pepco’s pleas, however, went largely unheeded. Despite a pro forma recitation to the contrary, the Commission’s opinion effectively ignored the overall impact of continuing, post-1974 attrition on the company’s financial integrity.17 Concurring generally with the recommendations made by its Staff, the Commission de-emphasized the role of attrition in Pepco's financial woes, selecting instead two phenomena allegedly unrelated to attrition — the 1974 energy crisis and a decrease in sales to a pool *137of interconnected electric companies — as the primary “causes” of Pepco’s economic troubles. In so doing, the Commission did acknowledge the historic problem of attrition and expressed concern over its own ineffectiveness in coping with the company’s financial problems in the past. Nonetheless, it did not even mention the substantial data reflecting 1975 financial developments which were submitted by Pepeo on numerous occasions. Such data, manifestly relevant and significantly different from the outdated statistics relied upon by the Commission, were presented by Pepeo in the following ways: (1) in the forecasts and trends filed with the original application; (2) in the two later requests for interim relief, which were supported by updated testimony and exhibits; (3) during the cross-examination of the company’s witnesses in its direct and rebuttal cases; (4) in the testimony of the Commission’s own Staff witnesses; (5) in the presentation pri- or to the closing of the record of actual figures for the more recent test year ended June 30, 1975; and (6) in written and oral submissions made after the closing of the public hearing. The Commission’s exclusion of this substantial and relevant evidence from its consideration was an unreasonable and arbitrary exercise of its ratemaking authority.
The overall effect of the Commission’s opinion was to deny Pepeo the chance to earn the rate of return termed “required,” “fair,” and “reasonable” in the opinion itself. Actual, historical evidence which was in the record for at least several months prior to the issuance of the Commission’s opinion clearly demonstrated that Pepco’s rate of return on equity had declined steadily — from 10.7%. on December 13, 1974, and to 8.1% on June 30, 1975 (and, after the record was closed, to 7.78% on September 30, 1975). The order under review, supposedly designed to raise Pepco’s return on common equity to 13% from the 10.7% actually experienced as of the end of 1974, could not conceivably raise Pepco’s return on equity to the “required” 13% level from the 8.1% rate experienced by the company as of June 1975 (or from the 7.78% rate experienced as of September 1975).
The one significant attrition-related rate base adjustment made by the Commission, that of using year-end 1974 data for Plant in Service, reflected only a general consideration of the historical trend of such costs. The available post-1974 data of record were excluded from the calculations.
In its brief before us, the Commission characterizes Pepco’s complaint as one directed essentially toward “the ever present problem of regulatory lag — an unfortunate — but inevitable part of the regulatory process,” the risk of which must be shouldered by the company and its investors.18 However, the readily recognized problem of regulatory lag has been considered by the Commission in earlier cases as a factor to be dealt with in calculating the rate of return, and as one to be allocated equitably to consumers as well as investors. Chesapeake & Potomac Telephone Co. v. Public Service Commission, supra, 330 A.2d at 241 — 42 (permitting an interim adjustment for future lag); Telephone Users, supra, 304 A.2d at 299 n.15 (justifying the use of a year-end rate base in light of evidence of regulatory lag and attrition). Realistic ratemaking in today’s economic climate must take into account the lengthening delays occasioned by the regulatory processes, while recognizing the need for preserving an appropriate balance between investor and consumer interests. In the instant case, the Commission arbitrarily and unreasonably cited the problem of regulatory lag in an effort to justify its failure to strike the needed balance by utilizing the company’s most recent historical data of record.
*138Urging the use of the most current actual data available, the Supreme Court has warned that “elaborate calculations which are at war with realities are of no avail.” Lindheimer v. Illinois Bell Telephone Co., 292 U.S. 151, 164, 54 S.Ct. 658, 663, 78 L.Ed. 1182 (1934), quoted in West Ohio Gas, supra, 294 U.S. at 82, 55 S.Ct. 324. The Commission in this case, electing not to be attuned to the realities of continuing inflation and attrition, refused to take proper cognizance of known and relevant changes of record. It thereby disadvantaged both investor and consumer interests, and denied Pepeo its constitutionally-guaranteed opportunity to earn a fair rate of return on its investment. The exclusion of the most recent available data from consideration and evaluation by the Commission was arbitrary in nature, confiscatory in effect, and made its decision one which is inconsistent with both reason and the evidence. See Telephone Users, supra, 304 A.2d at 300-01. See generally West Ohio Gas, supra, 294 U.S. at 82, 55 S.Ct. 324; New York Telephone Co. v. Public Service Commission, supra.
IY. THE ELEMENTS OF THE COMMISSION’S ORDER: THE CORRECT TEST PERIOD
Having concluded that the overall effect of Order No. 5739 was unjust and unreasonable (D.C.Code 1973, §§ 43-301, -401, -411), we must proceed to consider the elements thereof challenged by Pepeo. See Telephone Users, supra, 304 A.2d at 298; see also Permian Basin Area Rate Cases, supra, 390 U.S. at 790-91, 88 S.Ct. 1344. Primarily, the company contends that the Commission erred in refusing to replace the outdated calendar 1974 test period data with the actual data submitted for the 12-month period ended June 30, 1975. According to Pepeo, the striking increases in its expenses and the precipitous decline in its earnings, clear evidence of which was duly made a part of the record, unequivocally showed the 1974 test year to be unrepresentative of the future period during which the new rates would be in effect. The company emphasized that its revenue/expense/rate base relationships had changed so significantly that application of the Commission’s own ratemaking formula to the more recent data would have necessitated an increase of $48.6 million in revenues, rather than the $27.7 million actually authorized. When accompanied by the actual figures reflecting Pepco’s continuing decline in its rate of return on equity, the evidence demonstrated clearly and convincingly that only rates based upon the latest available data of record — data for the 12 months ended June 30, 1975 — could have afforded the company an opportunity to approach earning the rate of return found to be required by the Commission to maintain the utility’s overall financial integrity, to retain investor confidence, and to assure the economic viability which is vital to Pepco’s continued ability to provide reliable service to the public.
In seeking to justify its use of the calendar 1974 test period, the Commission concluded that there were two primary “causes” of Pepco’s financial decline during the latter part of 1974 which rendered the test year both historically “atypical” and presently representative of a “new normalcy.” A substantial decrease in retail sales due to energy conservation during the fuel crisis which surfaced in 1974 and a significant drop in energy sales to a pool of utility companies were cited as the two factors which distinguished 1974 from earlier years.19 They allegedly were responsible for the downward trend in earnings, a trend which the Commission acknowledged *139“shows no sign of reversal.” The calendar 1974 test year therefore was selected over previous years as being “more representative of conditions reasonably expected to exist in the future.” It also was chosen, however, without reference to known changes of record occurring more recently than the end of 1974, as we have discussed.
The Commission further found (although its dissenting member disagreed) that these “causes” were not related to attrition. The Commission’s majority stated, however, that
the record is clear that the increase in investment costs per unit of output noted in our last decision has continued, * * [so] we are persuaded that attrition is a phenomenon that is still with us, and we will therefore now, as we have in the past, use an end of period rate base, with appropriate adjustments, in order to compensate for the presence of attrition.
The reasoning and conclusions thus enunciated are incongruous. The Commission found the 1974 earnings trend to be decreasing at a faster pace than that experienced in previous years, and admitted that “the time, effort and expense involved in the 1970, 1972, and 1973 PEPCO cases appear to have been ineffectual in solving the economic problems of this utility.”20 This acknowledgement was made in the face of record evidence demonstrating that Pepeo failed by significant margins to earn the rates of return found necessary by the Commission in 1970 and 1973, or at any time from 1970 to 1975. The company’s rate base increased almost three times as fast as its operating income from 1973 to 1975. Notwithstanding such facts and findings, the Commission proceeded nominally to apply the same remedy used in the earlier rate cases — an end-of-period rate base. However, it then diluted that remedy by including the lower average figures for Construction Work in Progress (CWIP) and Materials and Supplies (M & S). Those adjustments alone arbitrarily reduced the company’s rate base by a total of approximately $36.8 million, and correspondingly reduced its revenue requirements by approximately $7.5 million.
By adopting a diluted, end-of-1974 rate base, the Commission all but made it certain that Pepeo would not be able to earn the rate of return which the Commission found to be necessary to attract capital and maintain investor confidence. In an attempt to keep rates down, the Commission impermissibly ignored the consumers’ and the investors’ long-range concerns with the financial stability of the utility.21 See Hope, supra, 320 U.S. at 603, 64 S.Ct. 281; Bluefield, supra, 262 U.S. at 692-93, 43 S.Ct. 675. Missouri ex rel. Southwestern Bell Telephone Co. v. Public Service Commission, supra, 262 U.S. at 291-92, 43 S.Ct. 544 (Brandéis, J., concurring in the judgment).
Reviewing the abundant record evidence of Pepco’s precipitous decline in earnings beginning mid-way through 1974 and continuing unabated into 1975, we conclude that the Commission’s decision to use a partially end-of-period calendar 1974 rate base was arbitrary as a matter of law. The revenue/expense/rate base relationships that allegedly would have provided a fair rate of return during calendar 1974 manifestly had changed, and no longer could be relied upon to produce a fair rate of return during the future period when the new rates would be in effect. The requisite “delicate balance” between investor and consumer interests was not attained, as the burden of shouldering the losses was placed only upon the company and its investors.
Confronted with strikingly similar circumstances in a telephone company rate case, the New York Public Service Commission routinely incorporated data from the six months following the originally-filed *140test period into a new test year. City of New York v. Public Service Commission, 42 A.D.2d 259, 346 N.Y.S.2d 6 (1973). That commission explained its adoption of the substituted test year “by stating that it would be unfair to the Company not to include actual operating results for the first six months of 1971.” 346 N.Y.S.2d at 8. In the instant case, the Commission should have reached the same conclusion.22
Furthermore, by focusing narrowly on two isolated “causes” of the company’s financial decline and distinguishing them from attrition-related factors (for which year-end or other adjustments are made), the Commission failed properly to evaluate and deal with Pepco’s overall economic problems. We agree with dissenting Commissioner Stratton’s assessment of the majority’s action:
With today’s decision the commission takes a giant step — backwards. Backwards into the rate-making ethos of a departed era when the harsh realities of an uncertain energy environment, and rampant inflation were not with us. Today’s decision denied the reality, abundantly demonstrated in the record, of remorseless price escalation in virtually every component of the cost of service, and by doing so insures the prompt relitigation of all the issues in this case.
The Commission further attempts to justify its failure to utilize a test period ended June 30, 1975, by attacking the procedural aspects of Pepco’s introduction of the new data into evidence. The Commission first argues that Pepeo did not manifest an intention to have the data for the 12-month period ended June 30, 1975, constitute the bases for a more valid test period. To support this contention, the Commission excerpted from the testimony of a Pepeo official the following:
. . . we are not — not suggesting a substitution of the June 30 year for the December 31 year, but I do ask . that the Commission take note of this information and apply it in reaching the conclusions in this case.
By the date of that isolated bit of testimony, seven months already had elapsed since Pepeo filed its rate increase application. During that time, the company’s financial situation rapidly was worsening and its earnings level was approaching the annual dividend level.23 Two urgent requests for interim rate relief subject to refund had been denied. The company was experiencing an actual loss of $75,000 per day during the delay, and understandably was seeking expeditious resolution of its rate increase application. Confronted with those realities, the Pepeo official urged the substitution of the most current information available (that for the year ended June 30, 1975), but did object to any reopening or continuance of the hearings to consider the new data. He stated:
*141A. There should be ample opportunity between now in July and the time the case is concluded for the Commission staff to review the June figures and assure themselves that it [sic] is comparable to the December figures that were originally submitted.
Q. But we are still operating on the basis of a 1974 test year for the purposes of this proceeding; correct?
A. Yes. I think it would be far preferable to use the most current information that is available, which would be June, but we would not want to introduce a delay by doing so, and we thought this would be, to present it now as a complete summary of the June figures and also to present the June figures in the same form as they were submitted by the staff would make it as convenient as possible for the Commission to use those figures in reviewing the ease.
In this context it is apparent that the Pepeo official intended that the most recent data be utilized in lieu of the outdated 1974 figures, but was reluctant to insist upon the substitution if doing so would risk further substantial delay. Moreover, on the next day, the President and Chairman of the Board of Pepeo unequivocally urged the adoption of the most recent data within the test period. He testified:
I will be quite candid and open with this Commission and everybody in the room. I instructed you, Mr. Hobelman, and lawyers in this case to update the test year, and for the June 30 test year, in this case. * * * I say to this Commission that I would urge the Commission to base its results on the June 30 figures. There is plenty of time for staff audit of those figures. All of the issues have been examined by the intervenors, by People’s Counsel. There is nothing which should require, in my opinion, a delay about it.
In addition, Pepco’s intent to have the Commission follow the accepted regulatory practice of basing its rate determinations upon the utility’s most recent actual data was manifested by its presentation of the new data on the basis of the same formulas, and in the same format, as the 1974 data originally filed. Only the numbers were changed to reflect Pepco’s worsening economic situation. Those changed numbers represented the most recent historical data which the Commission was bound to take into account. See West Ohio Gas, supra, 294 U.S. at 82, 55 S.Ct. 324; Telephone Users, supra, 304 A.2d at 297; New York Telephone Co. v. Public Service Commission, supra. They were not forecasts, which traditionally have been accorded special treatment in ratemaking proceedings.24 In both the testimony and the actual historical data, therefore, there was sufficient evidence of the company’s intent on the record to warrant our concluding that a finding to the contrary was arbitrary and capricious.
The Commission also argues that the new data were filed too late, and that its adoption of the new test period would have unduly prolonged the proceeding and prejudiced the rights of other parties. However, in reciting only: (1) the fact that the new data were filed with the rebuttal testimony; (2) the truism that “[a]ny proceeding simply must come to a conclusion at some point”; and (3) that the adoption of the new operating results would “necessitate further proceedings in recognition of the procedural rights of the other parties,” the Commission failed to substantiate its conclusion regarding any possible delay and potential prejudice which might have resulted from its utilization of the new test period data.
*142The new data were filed in ample time to allow for Staff and intervenor analysis and cross-examination, and no party sought additional time to review the updated facts. No objection was made to the admission of the testimony and its accompanying exhibits. No new issue concerning the revenue/expense/rate base relationships was raised either during cross-examination of the company’s rebuttal witness (which began five days after the new data were filed), or during the five months after the hearings, during which time briefs were filed, oral arguments were heard, and the two orders appealed from were issued.25 Finally, Pepeo offered to await audit of the new data, and certainly there was more than ample time during the nearly four months which elapsed between the hearings and the Commission’s decision for such an audit to be accomplished.26 It was only after the Commission issued its opinion, and Pepeo filed its Application for Reconsideration, that arguments were advanced against utilizing the most recent actual data.
As the new data thus consisted only of historical figures which were uncontested, timely filed, and easily audited, considerations of due process would not have required an extension or reopening of the hearings to admit further testimony concerning the new data. See, e. g., Re Delmarva Power & Light Co., 337 A.2d 517, 518-19 (Del.Super.1975); City of New York v. Public Service Commission, supra, 346 N.Y.S.2d at 9. This should have been apparent to the Commission, as reflected by our reasoning in Telephone Users, supra. In that case, the utility sought to introduce two additional wage adjustments as part of its rebuttal case, despite the fact that the company was fully aware of the pending changes at the time of its direct testimony. The Commission disallowed the adjustments, concluding that they did not afford the Staff or intervenor the opportunity to present evidence of offsetting adjustments without unduly prolonging the proceeding. We reversed, citing the following four factors as the bases for our holding: (1) the fact of the wage increase was known to all parties before the hearings began (it arose from a three-year contract between the utility and the union); (2) only the amount of the wage increase initially was unknown; (3) the company’s counsel alerted all parties at a prehearing conference that the company might seek allowance for the added employee expenses; and (4) the additional expenses were submitted in the utility’s forecast of operations filed two weeks before the Staff filed its evidence. 304 A.2d at 302.
Similarly, in the instant case: (1) the fact of Pepco’s rapidly deteriorating financial condition and corresponding need for greater rate relief than that which would be afforded by employing the 1974 data was made known to all parties long before the hearings began (in the forecasts filed with the original application and in the interim rate requests accompanied by fully updated testimony and exhibits); (2) only the exact *143amounts of Pepco’s later rate base components and financial requirements were unknown until the more current data were filed; (3) all the parties were alerted to the need for updating the test period both when the interim rate increase applications were filed and during Pepco’s direct testimony; and (4) data for the successive 12-month periods ending January through May of 1975 were submitted in support of Pepco’s request for interim rate increases, and hence were available for some time prior to the filing of the Staff’s and intervenors’ evidence.
The Commission contends that unlike the wage adjustment in the Telephone Users case, Pepco’s new test period figures were not “known and certain” changes of record. We disagree. The new data reflected only actual, historical evidence of the company’s financial situation for the 12-month period ended June 30,1975. They included no estimates, conjecture, or forecasts.27 Their authenticity was not challenged during or after the hearings. The new data consisted only of known changes of record, and the Commission erred in failing to use the figures for the 12-month period ended June 30, 1975 — the most recent actual data available — to establish the test period upon which to base its calculations of Pepco’s allowable retail rates. Cf. Boston Gas Co. v. Department of Public Utilities, supra; New York Telephone Co. v. Public Service Commission, supra.
V. THE EXISTENCE AND EFFECT OF ATTRITION
So holding, we address Pepco’s additional challenges to Order No. 5739, primarily to aid the Commission both on remand and in future rate proceedings. Our conclusions hopefully will reduce the necessity for Pep-co so frequently to initiate new rate proceedings, the substantial costs of which inevitably are borne by the consumers.
Pepeo contests the Commission’s rejection of attrition as the major reason for the company’s continuing financial decline. Attrition is the phenomenon which occurs when the utility’s investment in rate base, or the operating expenses required to produce a unit of sales, or both, rise at a faster rate than the revenues from such sales. Telephone Users, supra, 304 A.2d at 298; Boston Gas Co. v. Department of Public Utilities, supra, 269 N.E.2d at 257 n.19. The largest single component of a utility’s overall rate base is the value attributed to its Plant in Service. Typically, particularly for an electric utility, the next largest component is Construction Work in Progress (CWIP), which covers expansion projects prior to their completion, at which time their value simply is transferred to the Plant in Service account. In previous rate cases, the Commission recognized the serious attrition problem facing Pepeo, and sought to help compensate for it by adopting year-end, rather than weighted average, figures for all such rate base components. See Re Potomac Electric Power Go., 3 P.U.R.4th 65 (PSC D.C.1973); Re Potomac Electric Power Co., 83 P.U.R.Sd 113 (PSC D.C.1970). In the instant case, the Commission again recognized the continuing adverse impact of attrition on the company’s earnings, and acknowledged that the previously-applied remedy of a fully year-end rate base had not been effective.28 Nonetheless, it proceeded to make a smaller allowance for attrition than it had in the past. This was done (1) by using year-end figures only for the Plant in Service component of the rate base, (2) by applying the lesser average figures for CWIP and Materials and Supplies (M & S), and (3) by *144locking into the new rates based on those components an unreasonably high allowance for net profits which the Commission purported to believe would result from the sale of excess generating capacity to the PJM Interchange pool.
Pepco’s protestations concerning the Commission’s unwillingness to combat attrition permeate the record, and form the bases for the company’s specific allegations of error. Arguing an alternative, however undesirable, to the formal adoption of the updated test period for the year ended June 30, 1975, Pepeo contends that year-end, rather than weighted average, figures for CWIP and M & S should have been included in its rate base. As noted, Pepeo also argues that the test period should have been adjusted to reflect several major known changes of record.
Deferring, for the moment, consideration of those specific allegations of error, we note generally that the historical evidence of Pepco’s precipitous decline in rate of return and earnings (which began in mid-1974 and continued unabated through 1975) was thoroughly documented in the record, as discussed above. However, by disregarding the evidence submitted in 1975, and by rationalizing that the 1974 decline was attributed to factors allegedly unrelated to attrition (i.e., the energy crisis and a decline in sales to the PJM Interchange pool), the Commission arbitrarily utilized a test period and a consequent rate base devoid of predictive value.
In his dissent, Commissioner Stratton criticized the majority for its failure to adopt a reasonable approach to correct or compensate for expense as well as rate base attrition:
By following the traditional test-year rate-making approach in this case without making an appropriate allowance for attrition, the commission assumes that the distorted revenue/expense/rate base relationship in which this order is rooted will apply in 1976 and beyond, so long as this order is in effect. At the same time, protestations of bewilderment are entered at the fact that this is the company’s fourth rate case in six years. The reason is obvious: increases in expense and rate base outpaced the increases in revenue after the 1970, 1972 and 1973 rate cases, as they will do after the 1975 case in the absence of an order that recognizes the fact and allows for it. Unhappily, the commission has done no more in this case than to set the stage for lamentations over the company’s fifth rate request, which is sure to come in the near future. For, if ever a record demonstrated attrition, this one does. If ever a record called for realistic steps to deal with attrition, this one does. If there was ever a demonstration of the failure of revenue growth to keep up with the growth of expenses and investment, it appears in the record spread before the commission in this case, where there are data not only for the test year but also for the nine months following — data which the commission accepted into the record, I had thought, for the purpose of reaching a decision that took account of the real world as it was revealed to us by the operating results of the company during the pendency of the case.
We agree with his evaluation.29
When the Commission concluded that “attrition in the future may play a less significant role than it has in the past,” it ignored the substantial, uncontradicted evidence of record demonstrating an unabated and exacerbated decline in both the company’s earnings and actual rate of return. It premised its conclusion on the following three findings, all disputed by Pepeo: (1) “sales to retail customers appear to have resumed a somewhat normal growth pat*145tern”; (2) “sales to PJM appear to have leveled off to a large degree”; and (3) “PEPCO has substantially reduced its construction budget . . . .” The Commission’s second premise is factually incorrect, as the net interchange revenues uncontest-edly not only were forecast to but did in fact decline throughout 1975. Additionally, its first and third premise, while factually correct, do not contradict the substantial record evidence of continuing attrition.30 It is clear, therefore, that what “appeared” to the Commission to be an abatement of attrition was no more than “the hope of a better life to come” by which “fp]resent confiscation is not atoned for”. West Ohio Gas, supra, 294 U.S. at 83, 55 S.Ct. at 325.
VI. CONSTRUCTION WORK IN PROGRESS AND MATERIALS AND SUPPLIES
Pepco’s arguments pertaining to the Commission’s refusal to adopt year-end figures for CWIP and M & S also are well founded. The only justifications offered by the Commission for its decision to use average 1974 data are that the accounts fluctuated widely, and that their amounts in December of 1974 “appear to be abnormally high.” It also took the position that average amounts would be “more representative of the flow of dollars in and out of the accounts.”
The justifications advanced do not support the Commission’s decision. Wide fluctuations in CWIP are irrelevant for the purpose of determining the rate base. Any investment leaving CWIP enters Plant in Service, and thereupon is simply switched from one rate base account to another. To conclude that an end-of-period account “appears” to be high is not material to a proper consideration of the overall rate base. Moreover, while an average figure might better represent the cash flow over a definite period of time in the past, its predictive value, ascertained in a vacuum, is questionable at best, particularly in light of the inexorable increases in fuel costs.
The manner in which the Commission short-circuited Pepco’s efforts to achieve meaningful rate relief is most glaringly illuminated by the treatment afforded the funds invested in the company’s newest generating plant, Chalk Point Unit No. 3. This unit was under construction during all of 1974, and the related investment was carried in the CWIP account. In May of 1975, construction was completed, and the related investment was transferred to the Plant in Service component of the rate base. The Commission, however, arbitrarily excluded substantial sums related to the new unit from the company’s rate base not once, but twice.
Initially, as we have noted, the Commission prescribed average rather than year-end CWIP figures for inclusion in the 1974 rate base. By refusing to utilize the more representative year-end figures for CWIP, the Commission arbitrarily disregarded the substantial sums invested by Pepeo in that new plant, and thereby excluded approximately $27.5 million from the District of Columbia rate base. This effected a resultant decrease in the utility’s revenue requirement of some $5.5 million. Such a revenue deficiency more than offset the attrition allowance which resulted from permitting an end-of-period rate base for Plant in Service. The portion of the investment in CWIP that had been “averaged out” by the Commission simply was not permitted to earn a return. (To have allowed the use of a fully end-of-period rate base would have permitted Pepeo to earn an additional return of $2.5 million — an amount which would have substantially reduced the $4.3 million earnings deficiency forecast by the Staff to result from the Commission’s decision.)
In addition to effecting an unjust result, such a decision deviated from precedent. In both the 1970 and 1973 Pepeo rate or*146ders, the predecessor Commission sought to protect Pepeo against attrition by discarding the traditional average test year rate base in favor of an end-of-period rate base. In so doing, the Commission hoped to give greater recognition to increased future unit costs of generation arising from the company’s construction program. Although the record revealed — and the present Commission’s Staff recognized — that this method of combatting attrition had proven inadequate, the Commission chose to provide for even less relief directed towards counteracting attrition in the instant case than it had in the earlier cases.
In its second (and more costly) action regarding Chalk Point Unit No. 3, the Commission refused to recognize the known and certain change that occurred in May of 1975 when the $160 million in investment for that facility was transferred from the CWIP account into the Plant in Service account. By backing up to the end of 1974 for a determination of Plant in Service, and thus refusing to account for such a simple but major shift of funds, the Commission kept that $160 million from being able to earn a return as part of Plant in Service until the company’s next rate case. In this way, the Commission dramatically built attrition into its ratemaking, in a manner which was patently arbitrary and unreasonable.
The Commission’s principal Staff witness virtually admitted on cross-examination that his recommendation of this adjustment was rooted in sensitivity to public reaction.31 By adopting that recommendation, the Commission destroyed the delicate balance between investor and consumer interests, sacrificing the long-range goals of both groups to what it apparently perceived to be the immediate pecuniary interests of the consumers. Commissioner Stratton accurately focused on this point in his dissent:
If one concedes our agency expertise, the CWIP-averaging decision must be deemed to be an informed decision. Since it is clearly wrong, and the circumstances point to only one other explanation for it — namely, an expediency perpetrated in the interest of holding down rates it must be seen as arbitrary and is, on that basis, probably reversible error.
Commissioner Stratton also emphasized his belief that the decision to adopt 1974 average investment in M & S was arbitrary and capricious, as the known and certain average investment in M & S for the more recent test year ended June 30, 1975, was $6.7 million higher than the obsolete figure adopted by the Commission. We agree.
VII. THE FAILURE TO ADJUST FOR KNOWN CHANGES OF RECORD
From the standpoint of writing an opinion in a case such as this, it is inevitable *147for there to be an overlapping of some of the problems with which we must deal. Pepco’s final allegation of error — presented as an alternative — asserts reversible error in the Commission’s failure to adjust the 1974 results for three known and certain post-1974 changes of record. While our holding as to the proper test year essentially moots these contentions, we mention the three factors briefly.
The first involves the company’s net receipts from PJM Interchange sales. During the calendar 1974 test year, the net interchange margin applicable to District of Columbia business was $17.3 million. The 1975 operating results which were received in evidence reveal that the net jurisdictional margin had declined by $7.6 million annually. Pepeo demonstrated that the 1974 margin was unusually high, and the Commission acknowledged that “we see no evidence of record which persuades us that there will be a return to past normalcy in the near-term future in [PJM sales],” and that “. . . sales to PJM appear to have leveled off to a large degree. . . .”
Therefore, as the evidence demonstrated that the 1974 net revenue benefit to Pepeo was unrepresentative of expected future margins, and as more recent data of better predictive value was available, the Commission unreasonably and arbitrarily failed to substitute the net interchange margin experienced during the test year ended June 30, 1975, for the 1974 margin.
The Commission also erred in not making the appropriate adjustments for the actual transfer of $160 million from CWIP funds to the Plant in Service rate base component for the Chalk Point Unit No. 3 which occurred in May of 1975 (as discussed above), and for the $5-7 million increase in the company’s investment in M & S. These were known and certain changes of record which required no further testimony or cross-examination, and the Commission erred in disregarding them to the severe economic detriment of the utility.
VIII. THE REMEDY
On the basis of the Commission’s arbitrary and unreasonable refusal to utilize the latest historical operating data of record and the ensuing denial to Pepeo of an opportunity to earn either the overall 9.1% rate of return or the 13% rate of return on equity found required to attract capital, we must sustain Pepco's appeal, vacate Order No. 5739, and remand the case to the Commission with instructions to remedy its legal defects. Our authority to do so is delineated in D.C.Code 1973, § 43-705, which states in relevant part:32
Upon the conclusion of its hearings of any such appeal the court shall either dismiss the said appeal and affirm the order or decision of the Commission or sustain the appeal and vacate the Commission’s order or decision. In either event the court shall accompany its order by a statement of its reasons for its action, and in the case of the vacation of an order or decision of the Commission the statement shall relate the particulars in and the extent to which such order or decision was defective.
On remand, the Commission first should calculate modified rates according to the Staff’s own ratemaking formula based upon the data submitted for the test year ended June 30, 1975, and then calculate the revenue losses improperly experienced by Pepeo during the period that Order No. 5739 was in effect.33 Absent the *148atypical weather patterns experienced in 1976-’77, we would direct the Commission then to devise a means for restoring to Pepeo the revenues which it improperly has been denied. A reasonable means of accomplishing this so as to assure Pepco’s continued ability to perform its vital service to the public could be the application of a temporary surcharge to the rates currently in force in order to amortize the calculated loss over a period of time. In this way the delicate balance between the interests of investors and consumers could be maintained. See Hope Natural Gas, supra, 320 U.S. at 603, 64 S.Ct. 281.
The nature of such relief would remain prospective. In calculating the lost revenues, the Commission will place itself in a position to provide the rate relief it legally was bound to give at the time of its now-vacated opinion of November 12, 1975. To do otherwise would be to give perpetual legal effect to an unlawful order, and to unnecessarily and unwarrantedly penalize Pepeo, its investors, and indeed its customers for the passage of time necessitated by appellate review of that unlawful order.
The Commission opposes the imposition of any remedy involving a calculation of past revenue losses, contending that such relief improperly would constitute retroactive ratemaking. See Payne v. Washington Metropolitan Area Transit Commission, 134 U.S.App.D.C. 321, 330, 415 F.2d 901, 910 (1968). While we recognize the general principle precluding a utility from charging higher rates in the future in order to recoup past losses, that concept does not bar the relief to which Pepeo appears to be entitled.
The losses sought to be recovered in Payne were suffered pursuant to an interim order issued during the rate proceeding, but before any determination on the issue of a fair rate of return was made. Id, at 324, 415 F.2d at 904. The Payne court emphasized that the losses were not shown to be materially different from those projected in the interim order:
“[Pjrophecy, however honest, is generally a poor substitute for experience,” [West Ohio Gas, supra, 294 U.S. at 82, 55 S.Ct. 324] and actual operating results showing losses greater or less than those the Commission had projected might properly have affected the Commission’s conclusion as to the need for a fare increase or the amount of increase needed. [134 U.S. App.D.C. at 331, 415 F.2d at 911.]
In the instant case, the losses occurred after a fair rate of return had been determined in Order No. 5739, and the lost revenues have been shown, by abundant evidence of record, to be the result of arbitrary and unreasonable Commission rulings.
Our conclusion is consistent with that set forth in Chesapeake & Potomac Telephone Co. v. Public Service Commission, supra, 330 A.2d 236. In that case, the losses at issue were experienced between the release of an interim rate relief order, in which the rate of return was determined, and the final order. Those losses, we said,
were not past losses as of the time the 8.8% rate of return was determined, and they were not taken into consideration in setting that rate. The Commission’s interim proposal . . . authorized prospective relief only . . . . Past losses were not accorded any consideration in establishing the rate of return for the period in question and the order did not provide for the Company to recoup losses in revenues, if any, experienced during that period. [Id., 330 A.2d at 240.]
*149Likewise, in the instant case, the losses to be calculated on remand were not past at the time of the opinion in which the 9.1% overall rate of return and the 13% rate of return on equity were established, nor were they considered in setting those rates. The Commission issued its final order increasing revenues to compensate for anticipated future deficiencies in earnings. The losses to be calculated thus are essentially like those in the Chesapeake & Potomac case, and would not constitute a basis for retroactive ratemaking.
In reviewing a similar proceeding in which a rate of compensation for a past period was determined, the circuit court distinguished the result of an isolated past sale of capital assets (which could not be included in a calculation of future rates) from compensation for the service performed by the regulated company (which could be so included), regardless of whether the service was past or future. Summerfield v. Civil Aeronautics Board, 92 U.S.App.D.C. 248, 251-52, 207 F.2d 200, 203-04 (1953), aff’d on other grounds sub nom. Western Air Lines v. Civil Aeronautics Board, 347 U.S. 67, 74 S.Ct. 347, 98 L.Ed. 508 (1954). Referring to the general view that ratemaking is inherently a prospective concept, the court stated:
But we are impressed by the practical aspects of the situation. In this instance the Board was in fact looking at a period which had passed. The actual facts as to revenues and expenses for that period were known. * * * In saying that the Board was looking at a past period we are not departing from the rule in the T.W.A. case. [Transcontinental & Western Air, Inc. v. Civil Aeronautics Board, 336 U.S. 601, 69 S.Ct. 756, 93 L.Ed. 911 (1949).] The period began when the petition for the rate-making was filed . .; as of that date the rate-making was prospective. When the Board got around to making its findings and decision the period [of service] was past. It is to the latter actuality that we refer. [92 U.S. App.D.C. at 252, 207 F.2d at 204.]
The ordinary purpose of a utility rate, the court observed,
involves reimbursement for expenses incurred in performing the service, return on the investment used in the service, and a reasonable profit on the transaction. This much is due whether the service is past or future. [Ibid.]
In the instant case, the period for which the revenue losses are to be calculated came not only after the filing of the application for increased rates, but after the effective date of the order authorizing prospective rates. The lost revenues for which Pepeo may be entitled to recoupment became due to the company while the disputed and inadequate rates were in effect. They therefore are not analogous to past losses bearing no relation to expected future revenues which play no valid part in a prospective ratemaking proceeding.
Regarding the suggested method of collecting the losses, the Supreme Court, under comparable but reversed circumstances, ordered a refund of excessive amounts collected during the course of a rate proceeding in Federal Power Commission v. Tennessee Gas Transmission Co., 371 U.S. 145, 83 S.Ct. 211, 9 L.Ed.2d 199 (1962). The circuit court also has ordered distribution to the rate payers of funds resulting from invalid rate increases previously granted by the Commission. Washington Gas Light Co. v. Baker, supra, 88 U.S.App.D.C. at 127, 188 F.2d at 23. Reviewing courts with the power to direct refunds on the basis of invalid orders also have the concomitant power to direct consideration of the possible need for surcharges on the basis of such orders, for to function otherwise would be to permit the perpetuation of demonstrably confiscatory rates, rendering appellate review but a meaningless exercise.
Time and the weather, however, may have tempered the need for a surcharge to compensate the company for those aspects of the rate order which we hold to have been confiscatory. The differing views which have resulted in a majority, a dissenting, and a concurring opinion in this case have permitted a regrettably lengthy period to elapse on appeal. We *150judicially note that the summer of 1976 was moderately warmer than normal, and that the winter of 1976-’77 was uniquely cold. These and other factors may have led to unexpectedly high revenues for Pepeo for those months, which, equitably, may have offset the need for a surcharge. In the computation on remand of the company’s improperly proscribed revenue shortfall attributable to the arbitrary diminution of its rate base in the order which we vacate herein, we sanction as a possible offset thereto what may have been unusually high revenues experienced by Pepeo during that period. Of course, at this time we have no way of knowing what the facts will prove to be; that must remain for the parties to demonstrate and for the Commission to determine on remand.
Vacated and remanded.
. Pepco’s original filing was predicated on an eight-month actual and four-month forecast basis. It later was updated to encompass actual data for all 12 months of 1974 and, prior to the close of the record, for the first six months of 1975.
. The Office of People’s Counsel was established by Congress on January 2, 1975. See D.C. Code 1977 Supp., § 43-205. The early delay in this case was occasioned in part by the Commission’s desire to obtain the participation of People’s Counsel, which office had not yet been established during the first few months of the proceedings.
. Attrition may be defined as the inability of a utility to earn its authorized rate of return due to the fact that its investment in rate base and/or its operating expenses are rising faster than revenues. Telephone Users Ass’n v. PSC, D.C.App., 304 A.2d 293, 298 (1973), cert. denied, 415 U.S. 933, 94 S.Ct. 1448, 39 L.Ed.2d 492 (1974). The importance of attrition to a proper determination of rates is discussed in section V of this opinion, infra.
. Pepco’s first application for an interim rate increase was dismissed by Order No. 5707, issued on April 7, 1975; the second was dismissed by Order No. 5725, dated July 11, 1975. As Pepeo has not challenged those orders on appeal, we do not consider their merits. They are, however, illustrative of Pepco’s continuing efforts to seek rate relief from the Commission.
. Chesapeake & Potomac Tel. Co. v. PSC, D.C.App., 330 A.2d 236, 239 (1974); Goodman v. PSC, D.C.App., 309 A.2d 97, 100 (1973); Tel. Users Ass’n v. PSC, supra note 3, 304 A.2d at 296.
. Arbitrary action is “action not based on facts or reason. The burden upon petitioner is . to demonstrate clearly and convincingly a fatal flaw in the action taken.” Goodman v. PSC, supra note 5, 309 A.2d at 101 (citations omitted).
. See, e. g, cases cited in note 5, supra.
. For utility ratemaking purposes, the rate base multiplied by the rate of return (with the necessary adjustments for the company’s income tax liabilities) determines the revenue requirements. “Rate base” has been defined as the value of a company’s property used and useful in the public service minus accrued depreciation. See Telephone Users, supra, 304 A.2d at 297 n,6. For discussions of rate of return, see Williams v. WMATC, 134 U.S.App.D.C. 342, 348, 415 F.2d 922, 928 (1968) (en banc), cert. denied, 393 U.S. 1081, 89 S.Ct. 860, 21 L.Ed.2d 773 (1969), and D. C. Transit System, Inc. v. WMATC, 121 U.S.App.D.C. 375, 400-01, 350 F.2d 753, 798-99 (1965) (en banc), cert. denied, 389 U.S. 847, 88 S.Ct. 52, 19 L.Ed.2d 115 (1967).
. Emphasizing the predictive value of test year “relationships,” Commissioner Stratton stated in his dissent:
The purpose of [the test period approach] . is not that future rates are reasonable if in the test year they would have produced a fair return, or that the increase in revenues that would have produced a fair return in the test year is ipso facto the increase that will do so in the future. The test year approach assumes — and this is vital to an understanding of it — that the relationship among revenues, expenses, and rate base that obtained in the test year will continue into the future. Only if this assumption is valid does it follow that rates which would have produced a fair rate of return in the test year will produce a fair rate of return in the future.
.The forecasts reflected the following data:
12 Months Ending December,
March June 1975
Return on Rate Base (unadjusted)
End of Period -O CD <1 © 00 <1 © <1
Average <1 CO Ü1 to -4 to CD
Return on Equity
End of Period CD CO CD O <1 b)
Average CD <3 CD Í-* 00 h-
. See Telephone Users, supra, 304 A.2d at 298. In his dissent, while distinguishing between rate base and expense attrition, Commissioner Stratton emphasized his disagreement with the majority’s treatment of manifest rate base attrition as minimal or nonexistent:
Where I part company with the Commission is in its treatment of the attrition malady for which the remedy prescribed lies somewhere between a placebo and bloodletting.
. A company official emphasized that sharply escalating plant and financing costs, dramatic *135Pepco’s witness stressed that the practical effect of those results was to preclude the
increases in fuel costs resulting from the national energy crisis, substantial construction programs only recently curtailed, and rapidly rising and embedded costs of senior capital were responsible for the company’s deteriorating financial situation. The official’s testimony was supported by several independent analysts, as well as by other company representatives.
. The Staff witness stated: “In [the prior 1973 rate order] the Commission found ‘a classic picture of attrition’ and used an end-of-period company from “obtaining] additional capital funds in the public securities markets on
rate base for rate making purposes. * * * [T]he Staff is of the opinion that the conditions existing in [the 1973 rate case] that led to the finding of attrition are still present.”
. The chronology of the hearing was as follows. The cross-examination of Pepco’s direct case began on June 10 and ended on June 23, 1975. The cross-examination of the Staff and intervenors’. witnesses lasted from July 2 to July 23, 1975. The cross-examination of Pep-co’s rebuttal witnesses began immediately thereafter, and terminated on July 24, 1975.
.The official further testified that any attempt to obtain financing through common stock or debt offerings either would be illegal (if the market price fell below par value, which then seemed likely), or at the very least,
would compound the present process of deterioration in Pepco’s financial situation to a point that recovery of satisfactory financial health would require more time and more rate increases.
Moreover, he stated:
Pepco’s position is critical. For all practical purposes Pepeo is foreclosed from the public capital markets at a time when the Company has $60 million of outstanding short-term debt. The continuation of our minimum construction program will necessitate increasing the Company’s short-term debt to approximately $100 million by the end of the year, with further increases during 1976. It is imperative that the Company be placed in the position of being able to finance these expenditures with permanent capital. However, until Pepeo is able to again demonstrate at least minimum levels of earnings on its common stock and adequate margins of protection for investors in senior securities, its access to the organized capital markets will continue to be blocked.
. The Pepeo witness added that once lost, investor confidence could be reestablished only with substantially higher earnings than are required simply to maintain such confidence. In addition, the recovery process would be particularly slow and painful for the company since it is still remembered by many investors as “the only significant electric utility, other than Consolidated Edison, to have omitted a cash dividend on its common stock in modem times.”
. The Commission took “official notice” of certain 1975 operating data, principally to project an offset of retail sales against PJM interchange sales. See note 19, infra. Additionally, the Commission made two minor rate base adjustments to reflect 1975 data, namely a union wage increase and a gross receipts tax increase, and took into consideration 1975 stock sales and a 1975 debt retirement. Otherwise, the Commission based its entire discussion on data derived during the years 1970-74.
. In her oral argument, People’s Counsel likewise stated:
Those investors who invest in the common stock of a regulated industry are given an opportunity to earn a fair, reasonable rate of return. [But] this is not [fool-] proof. This is something which does have risks attached to it. * * * One of these risks is, of course, regulatory lag.
. Pepeo is one of approximately 12 utilities which comprise the Pennsylvania-New Jersey-Maryland (PJM) Interconnection. As a PJM member, Pepeo has used the interconnected transmission systems to relieve its customers of a significant part of the carrying costs of its facilities by means of off-peak kilowatt-hour deliveries to PJM from Pepco’s plant which would otherwise be idle during periods of low demand. The company also purchases energy from other PJM utilities when it is economically or technically beneficial for it to do so. Pep-co’s participation in PJM has served to reduce its overall cost of service, thereby considerably benefitting its retail customers. However, circumstances have combined to reduce Pepco’s PJM sales significantly.
. See Re Potomac Electric Power Co., 3 P.U. R.4th 65 (PSC D.C.1973); Re Potomac Electric Power Co., 95 P.U.R.3d 99 (PSC D.C.1972); Re Potomac Electric Power Co., 83 P.U.R.3d 113 (PSC D.C.1970).
. The Commission’s principal Staff witness had acknowledged that the remedy ultimately prescribed would be insufficient to alleviate Pepco’s financial woes.
. The necessity to insure that the rates set would be fair and would have meaningful predictive value led one commission to utilize a future test period accompanied by a fully projected rate base. Re Georgia Power Co., 9 P.U.R.4th 381 (1975). Finding that this would eliminate attrition for the test period, the Georgia commission concluded that any difference between the allowed and actually experienced rate of return would be accounted for instead by errors of projection. According to that . commission, such errors would prove less detrimental to the public interest than the unknown effects of future attrition. Id, at 385-86.
Another commission solved the problems of attrition and regulatory lag by utilizing a rolled-in test year (/. e., one which “proformed” [sic ] the capital structure to encompass the upcoming calendar year). Re Central Maine Power Co., 8 P.U.R.4th 277 (1975). That solution simultaneously avoided the prophesies inherent in future test years, and the inevitable imbalance of year-end rate bases. Id., at 286. Thus, the Commission’s error in the instant case is seen to be egregious in view of the many alternative means available to it for setting realistic and non-confiscatory rates.
. During oral argument before us, Pepco’s counsel contended that after filing its initial rate request, the company “fell immediately into a financial decline” described as “the worst in Pepco’s history,” worse, in fact than that of 1969, “when the company was forced to halve its accrued dividends.” This same point had been made during the administrative hearing, by Pepco’s President and Chairman of the Board, in direct testimony during the rebuttal phase.
. Forecasts play two important roles in the ratemaking process. “There are times, to be sure, when resort to prophecy becomes inevitable in default of methods more precise.” West Ohio Gas, supra, 294 U.S. at 82, 55 S.Ct. at 325. See Southwestern Bell Tel. Co. v. PSC, supra, 262 U.S. at 288, 43 S.Ct. 544. In addition, forecasts supplementing actual experience are essential to a determination of prospective rates. This court recently has held that the Commission’s refusal to consider forecast data in a ratemaking proceeding was reversible error. Telephone Users, supra, 304 A.2d at 300-01. Nonetheless, “prophecy, however honest, is generally a poor substitute for experience.” West Ohio Gas, supra, 294 U.S. at 82, 55 S.Ct. at 325.
. In its brief on appeal, People’s Counsel suggests that the adoption of the updated test year ended June 30, 1975, may have required a revenue and expense adjustment to “synchronize” those elements with the company’s investment in its new plant, Chalk Point Unit No. 3. However, People’s Counsel does not cite, and we cannot find, evidence to support this contention so belatedly raised. Moreover, the principal Staff witness, when cross-examined on the subject, stressed that any such attempt at synchronization would be “ . . . too speculative for my purposes,” and would have deprived Pepeo of the benefit of even the partially year-end rate base which he proposed, and then conceded was inadequate to counteract the effects of existing attrition.
. As noted, Pepeo facilitated audit of its most recent data by submitting them in accordance with the Staff’s formulas and format, as it did in its original submission. Moreover, as is generally known (and was confirmed at oral argument), members of the Staff continuously audit the company’s books, which are maintained in accordance with a Commission-prescribed uniform accounting system. Verification of the latest actual data therefore would have required minimal additional time and effort on behalf of the Commission's Staff and the inter-venors. Additionally, in its opinion the Commission specifically acknowledged: “On this record, few if any questions were raised about the income, expense, and operating results recorded on the PEPCO’s books.”
. The inclusion of forecasts, however, would not necessarily excuse the Commission for its failure to adopt the new test period. See note 24, supra.
. At the outset of its decision, the Commission observed:
[T]his decision will be the fourth decision by the Commission in the past six years on rate increase applications by PEPCO. We make this observation not by way of criticism of either PEPCO or our regulatory predecessors, but rather as an expression of our deep concern that the time, effort and expense involved in the 1970, 1972, and 1973 PEPCO cases appear to have been ineffectual in solving the economic problems of this utility.
. For a comparison of the various means used by other commissions to set realistic rates, see Re Georgia Power Co,, supra n.22 (future test period accompanied by fully projected rate base used); Re Central Maine Power Co., supra n.22 (rolled-in test year utilized); Re New England Tel. & Tel. Co., 22 P.U.R.3d 470 (1958) (test year updated for following 12 months); Re Mountain States Tel. & Tel. Co., 8 P.U.R.3d 176 (1954) (estimates for the six months following the test period selected to compensate for attrition).
. Sales to retail customers did increase approximately 6% in 1975, but greater attrition occurred then than in 1974. It also is true that Pepeo reduced its construction budget, but its investment in new plant remained substantial, and unit generation costs continued to increase, as expected.
. He readily agreed with “the current Commission and Pepeo practice with respect to the treatment of CWIP for rate-making” (f.e., using end-of-period figures to compensate for attrition), and stated:
Obviously, the ability to earn on the construction work-in-progress, and at the same time improve the cash flow, would obviously have an effect on the borrowing ability of the company.
The following exchange then occurred:
Q. Now, if you don’t feel that it is fair and reasonable to abandon the methodology because the dollar amounts are substantially larger, . . . then, whyV... do you justify . . . the averaging of CWIP during the test period, on the grounds that you have done so in order to place the method employed by Pepeo on an equal basis with the AFUDC [allowance for funds used during construction] Accounting Convention.
A. This was a situation . . whereby when Pepeo came in for its increase, as you well know it attracted a great deal of attention. * * *
I thought it would be appropriate even though the use of “averaging” even though the end-of-rate base [sic] is recommended, the use of the average for construction work-in-progress was unusual.
I thought the times called for unusual treatment. That is the reason why we thought we would adopt it.
We are separating it from attrition in this particular instance. In other words, we recognize it has to be used in the computation of attrition, but we separate it from the application of attrition to the rate base.
Obviously, for the Commission thus to “separate” CWIP from attrition is not merely to fail to compensate for attrition, but consciously to aggravate it.
. We previously have held that the appeals provisions of the Administrative Procedure Act, D.C.Code 1973, § 1-1510(1), are superseded by this and other relevant sections of the Code which deal with public utilities. See Chesapeake & Potomac Tel. Co. v. PSC, D.C. App., 339 A.2d 710, 713 (1975).
. Order No. 5739 became effective on December 13, 1975, and expired on December 13, 1976, when revised rates authorizing an additional $29.4 million in revenues became effective by means of Order No. 5849. The revised rates were set pursuant to another ratemaking proceeding which, as predicted, followed close on the heels of the instant case.
The Commission has urged, in a Motion To Dismiss filed on January 14, 1977, that the issuance of the revised rates in Order No. 5849 renders moot and impractical the question of *148relief in the instant case. However, Pepeo was never allowed to recoup the revenue losses experienced as a result of the Order at issue in this case. The question of relief therefore is still a contested issue, and the Motion To Dismiss is denied.
Additionally, even if the Order here under review technically were moot, it presents issues of a continuing nature long recognized as an exception to the mootness doctrine. Roe v. Wade, 410 U.S. 113, 93 S.Ct. 705, 35 L.Ed.2d 147 (1973); Southern Pacific Terminal Co. v. ICC, 219 U.S. 498, 31 S.Ct. 279, 55 L.Ed. 310 (1911). This exception applies most broadly in cases reviewing administrative agency actions. See Golden Holiday Tours v. CAB, 174 U.S. App.D.C. 292, 294, 531 F.2d 624, 626 (1976). Pepco’s appeal presents substantial legal questions that not only call for remedial action in and of themselves, but which readily are capable of repetition in future cases.