dissenting:
Because I view the Commission’s order here as the culmination of a conscientious and careful analysis of the extensive evidence in the case incorporating findings and conclusions on each issue that are amply supported in the record, I must dissent. While one could disagree with some of the Commission’s conclusions, none is either arbitrary or capricious.
The majority’s severe criticism of the Commission’s opinion and order might leave the impression that the Commission denied the company any increase in revenues whatever when in fact the Commission authorized a substantial increase in rates so as to provide the company with $27,657,000 additional annual revenue. Particularly troublesome to me is the remand of the majority directing the Commission to establish a substantially larger rate base in conformity with company figures as of June 30, 1975, so as to provide retroactively a substantial increase in company revenues. In my view this remand goes well beyond the bounds of legitimate agency review.1
Contrary to repeated assertions by the majority, the Commission has in fact set forth quite clearly in its 52-page final opinion and order a discussion of the evidence and its reasoning on the relevant issues. Accordingly, I must divorce myself from the effort to label the decision as “arbitrary and capricious.”
I. ASSERTIONS OF ERROR
The majority summarizes the asserted errors it finds in the order appealed from as follows:
Examination of the 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 close of the originally proposed calendar 1974 test period. [At 132,133.]
The majority holds that even though the test year on which the company based its application was calendar year 1974, it was arbitrary and capricious, and therefore error for the Commission not to have used the company figures revised as of year-end June 30, 1975, as the test year. Since, as will be seen, the Commission discussed and used many of the company’s 1975 figures, the majority appears to be standing on the proposition that it was error as a matter of law for the Commission not to have used all of those figures thereby effectively changing the test year to June 30, 1975, even though such data was not put in the record until it came time for rebuttal testimony. I submit that at that juncture it was clearly a matter of discretion for the Commission. It is far from clear to me just what indicia *151there are to justify the majority’s application of the adjectives “arbitrary and capricious” to that determination. The mere affixing of such a label cannot confer validity on an appellate ruling that is wholly unsupported and unjustified. An examination of each of the Commission’s findings and conclusions reveals that none was arrived at arbitrarily, but rather only after thoughtful consideration of the evidence and of the arguments on each side.
The majority also concludes that the rates set would deny the company an opportunity to earn a fair rate of return. I submit that this is pure speculation. The majority does not support its conclusion with any computation or projection or other justification except to indicate its complete acceptance of the company’s evidence and the estimates of its witnesses, not an insignificant part of which was contested by intervenors and staff witnesses2 and rejected selectively by the Commission.
II. THE STANDARD OF REVIEW
The majority recognizes that the power to make rates was delegated by Congress to the Commission, but forgets that as an appellate court our review of a utility commission order is strictly limited. It is the narrowest judicial review in the field of administrative law. K. Davis, Administrative Law of the Seventies § 29.00, at 647 (June 1976); 2 F. Cooper, State Administrative Law 756-72 (1965).
“[T]he scope of our review of the Commission’s actions is ‘limited to questions of law . . . and the findings of fact by the Commission shall be conclusive unless it shall appear that such findings of the Commission are unreasonable, arbitrary or capricious.’ ” Watergate Improvement Associates v. Public Service Commission, D.C.App., 326 A.2d 778, 788 (1974), quoting D.C. Code 1973, § 43-706. In an appeal by an intervenor of an earlier Pepeo rate increase, Judge Harris, speaking for the court said:
Arbitrary action, however, is action not based on facts or reason. . . . The burden upon petitioner is not merely to put forth an acceptable alternative but rather to demonstrate clearly and convincingly a fatal flaw in the action taken. Petitioner has not met that burden. He simply asserts a difference of opinion with the Commission. [Goodman v. Public Service Commission, D.C.App., 309 A.2d 97, 101 (1973) (citations omitted).]
Four years ago when intervenors contested a $12,000,000 rate increase for the company, this court quoted with approval the guiding rule for appellate review of utility agency orders as set forth in Williams v. Washington Metropolitan Area Transit Commission, 134 U.S.App.D.C. 342, 362, 415 F.2d 922, 942 (1968), cert. denied, 393 U.S. 1081, 89 S.Ct. 860, 21 L.Ed.2d 773 (1969):
Our role as a reviewing court is not to make an independent determination as to whether fares fixed by the Commission are just and reasonable, but rather to insure that the Commission, in exercising its rate-making power, has acted rationally and lawfully. Our function is normally exhausted when we have determined that the Commission has respected procedural requirements, has made findings based on substantial evidence, and has applied the correct legal standards to its substantive deliberations. [Telephone Users Association v. Public Service Commission, D.C.App., 304 A.2d 293, 296 (1973), cert. denied, 415 U.S. 933, 94 S.Ct. 1448, 39 L.Ed.2d 492 (1974).]
That statement of the law is reduced to a nullity by today’s opinion. The final opinion and order of the Commission here easily meets the test of the Telephone Users case. It could well be one of the most thorough and comprehensive decisions this court has received from an administrative agency in the District of Columbia.
*152The basic disagreement I have with the majority opinion is in its treatment of the facts and in its application of the law to the facts. For example, the majority applies the standard of “arbitrary and capricious” in circumstances where the transgressions of which it complains are no more than differences in judgment. One who examines the order will find that the Commission did not pick its conclusions out of thin air. It did not arrive at conclusions except after noting evidence upon which the conclusion could be based and in each instance the Commission set forth supporting reasons. “The court’s responsibility is not to supplant the Commission’s [balancing] of [the factors involved] with one more nearly to its liking, but instead to assure itself that the Commission has given reasoned consideration to each of the pertinent factors.” Permian Basin Area Rate Cases, 390 U.S. 747, 792, 88 S.Ct. 1344, 1373, 20 L.Ed.2d 312 (1968).
As long as there is substantial evidence to support a reasoned conclusion of the Commission we must affirm. Watergate Improvement Associates v. Public Service Commission, supra 326 A.2d at 783-84. See also Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971).
The majority places much reliance on West Ohio Gas Co. v. Public Utilities Commission, 294 U.S. 79, 55 S.Ct. 324, 79 L.Ed. 773 (1935) and 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). In the New York Telephone Go. case an interim rate increase was ordered but it was followed by an interim partial reduction. When it developed that the company’s actual earnings under those orders yielded a significantly lower return than the Commission had said was reasonable, even lower than the company’s earnings prior to the application, the company asked that the hearings be reopened before the final order was entered. Although the Commission did not deny that the rates were confiscatory, the majority of Commissioners refused to reopen the proceedings suggesting instead that a new rate proceeding be initiated. The appellate court held that: “Where there is a great disparity between the predicted rate of return found necessary by the Commission and the return actually earned,3 a suitable adjustment should be made to reflect the attrition trend or the erosion that has taken place.” Id. at 170, 324 N.Y.S.2d at 56, 272 N.E.2d at 557.
In the instant case we have neither a concession that the rates are confiscatory nor a blanket refusal by the Commission to consider updated figures. In fact the 1975 data were considered and many were used by the Commission as will be detailed, infra. The New York Telephone Co. case is not authority for today’s holding that it was arbitrary and capricious for the Commission not to have changed the test year at the conclusion of the hearing.
In West Ohio Gas Co., the Commission confined itself to operating data for 1929, and refused to consider available data as to actual operations for 1930 and 1931. It is in this context that the Court said, as quoted by the majority:
To shut ones 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. 294 U.S. at 81-82, 55 S.Ct. at 325.]
In the instant case the Commission was not using a test year two years old and did not exclude the updated figures “from its reckoning.”
When a gas company sought to enjoin allegedly confiscatory rates set by a state regulatory commission, the Supreme Court in affirming a dismissal of the complaint said: “That question [the constitutional question] is whether the rates as fixed are confiscatory. And upon that question the complainant has the burden of proof and the court may not interfere with the exercise of the state’s authority unless confiscation is clearly established.” Los Angeles *153Gas Co. v. Railroad Commission of California, 289 U.S. 287, 305, 53 S.Ct. 637, 643-44, 77 L.Ed. 1180 (1933).
When the Fourth Circuit reversed a decision of the Federal Power Commission which had reduced rates of a gas company, on the grounds that the Commission had failed to consider certain costs in the rate base and had improperly computed depletion and depreciation, the Supreme Court held that a showing of a great deal more was required if the courts were to reverse such an order.
The Court observed rather sensibly:
Rates which enable the company to operate successfully, to maintain its financial integrity, to attract capital and to compensate its investors for the risks assumed certainly cannot be condemned as invalid, even though they might produce only a meager return on the so-called “fair value” rate base. . . . And he who would upset the rate order under the Act carries the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences. [Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 602, 605, 64 S.Ct. 281, 288, 289, 88 L.Ed. 333 (1944).]
Applying the Supreme Court’s standard in Hope, to the facts in this case, it becomes clear the majority has failed to carry its “heavy burden” of showing that the $27,-657,000 increase in revenues awarded the company by the Commission is so inadequate that the company would not be able to operate successfully, and that it would thereby lose its financial integrity and its ability to attract capital. That conclusion made by the majority is not justified by the facts of this case. I would note in this regard that Pepco’s remarkably improved financial standing at the end of 1976, after one year of experience under the new rates4 is devastating testament to the fallacy inherent in the majority’s speculation that the increased rates would be confiscatory.
III. THE TEST YEAR
Contrary to the contention of the majority that it was arbitrary not to have used a June 1975 test year in arriving at a fair rate base, it can be demonstrated there is no justification whatever on this record for the company to now contend that the Commission erred in using the 1974 test year with modifications being made, as warranted, for the June 1975 data. As will be seen, it was a matter properly left by the parties on the record to the discretion of the Commission and consequently is not a matter to be taken over by an appellate court.
In the application for a rate increase filed by the company it asked that it be based on a 1974 calendar test year and it supplied actual figures for the first eight months of 1974 augmented with detailed estimates for the remaining four months. As figures for the company’s actual operations for those four months became available they were supplied by the company. Thirteen different parties intervened. After cross-examination of company witnesses was completed and as the respondent and intervenors were completing their testimony in opposition, the company, on Friday, July 18,1975, filed proposed rebuttal testimony of its Sr. Vice-Pres.-Finance, with two exhibits which set forth financial data reflecting operating results from January 1 through June 30,1975. (Company exhibits G and 14.) That witness testified on those figures “in rebuttal” on Wednesday, July 23rd.
The following was brought out during cross-examination of that rebuttal witness by counsel for the Commission:
Q. Mr. Davis, are you proposing a new test year for the Commission to use in this case?
A. I have indicated in the testimony that we think it is important to place this information on a test year revenue requirement basis before the Commission. Now we are not — not suggesting a substitution of the June 30 year for the December 31 year, *154but I do ask, or do suggest in my rebuttal testimony, and I would ask, that the Commission take note of this information and apply it in reaching the conclusions in this case . . [Emphasis supplied.]
The majority quotes and relies on the testimony of Pepco’s President, J. Reid Thompson, who testified in rebuttal that same day wherein he stated at first: “I would urge the Commission to base its results on the June 30 figures.”
However, Mr. Thompson changed his position when cross-examined by People’s Counsel, but the majority has ignored this damaging testimony in its effort to brand the Commission with arbitrariness in not changing to a June 30, 1975 test period. Mr. Thompson testified as follows:
Q. . You are not suggesting a new period, are you? You still want your end of period rate base considered in this case December, 1974. You are not requesting an amendment of that at this time?
A. I don’t want to get bogged down in semantics or play a game.
Q. Well, let’s not get bogged down. You are a lawyer. Let’s understand—
A. What I am saying to this Commission is trying to arrive at the truth here as to what is a fair and reasonable rate of return. I am suggesting to this Commission that if it can be done in the light of their understanding and their responsibility without delaying this case, without any further opening the record, that they should adopt a June 30 test year. I am suggesting precisely that, but I am suggesting that, however, if it requires a reopening of the record to lay in a case, that they don't do that. Rather, grant an additional attrition allowance to take into account June 30 figures. [Emphasis supplied.]
His final position then seems to be clear that the company was not insisting on a change in the test year, but was urging the Commission to take into consideration the June 30 figures. Since the case was filed and tried on a 1974 test year, it is apparent that President Thompson was necessarily leaving to the discretion of the Commission the decision as to how much consideration to give the new data. Mr. Thompson concluded his testimony by saying:
. I would urge upon this Commission the urgent necessity for prompt action on the case after it is completed, with the same alacrity with which you have conducted the hearings, Madam Chairperson.
When the hearing was terminated there was no question on the record but that 1974 was still the test year, that the company believed the Commission should give great consideration to the updated figures but that any further delay to explore the new data was not acceptable to the company. Accordingly, respondent and intervenors, not having had time to obtain in depth familiarity with the new data, did not cross-examine Mr. Davis in detail on the new information nor did they recall their witnesses to testify regarding the updated 1975 figures as would have been their right had the Commission announced that it was adopting a new test year. The earlier testimony of all witnesses of the respondent and of all witnesses for the intervenors had dealt only with the 1974 calendar year data. That is what all of the first 2600 pages out of a total of 2900 pages of testimony were all about. When wholly new data for the test year is furnished at the end of a case, procedural due process as well as basic considerations of fairness require an opportunity for all parties to review it and cross-examine the utility’s witnesses regarding it and to offer further evidence in surrebuttal.
In view of the testimony of the company’s own officers, I find it surprising it would claim subsequently on petition to the Commission for reconsideration that the use of June 30,1975, as a test year was an issue in the case. More importantly, I must confess a complete loss to understand how, on such a record, the majority here can defend, let alone advance, such an argument. I would hope that the majority does not intend to suggest that a position taken by a *155party on the record during a hearing, or that a stipulation entered into, or a representation made to an administrative tribunal, is not something advanced in good faith and to be relied on by the Commission.
It strikes me as somewhat misleading for the majority to suggest an inference should flow from the fact (page 142) that “[n]o objection was made to the admission of the testimony and its accompanying exhibits,” (referring to the June 30, 1975 figures) when there was patently no cause for an objection after the Financial Vice-President of the company who presented the new financial data, flatly stated that the company was not requesting a change to a June 30, 1975 test year.
Furthermore, in view of this record, the majority’s statement that: “It was only after the Commission issued its opinion, and Pepeo [appealed] that arguments were advanced against utilizing the most recent actual data” is equally vulnerable. The objections were forthcoming at that point because of the strong arguments of the company raising this issue in its petition for reconsideration. In oral argument to the Commission Pepeo did not raise any question about a June 30, 1975 test year. Instead its lawyers appeared to assume that a 1974 test year was to be used.
Company counsel, Carl D. Hobelman, said for example:
Now what solutions to the attrition problem exist?
The one that’s traditionally been used by this Commission and most others is year-end rate base, and we think that if this Commission is going to stick with the 1974 test period that that’s a minimum.
Edward A. Caine, the other Pepeo counsel who argued, flatly stated, while discussing the possible effect of company land transactions, “[t]he test period in this case is 1974.” The case having been filed and tried on a 1974 test year up to almost the last day, the Commission had every right to use a 1974 test year, utilizing the 1975 updated figures as appropriate in its discretion. None of the authorities cited by the majority on this issue pose a comparable factual situation.
However, the Supreme Court of Arkansas has had occasion to address a strikingly similar situation. In Arkansas Power & Light Co. v. Arkansas Public Service Commission, 226 Ark. 225, 289 S.W.2d 668, 673 (1956), where the Commission refused to consider information after the end of the test year, the court held:
As to the testing period, it clearly appears to us from the record that the appellant, itself, in its rate application chose the testing period, and the Commission accepted appellant’s choice. Appellant’s application was tried throughout on the theory that the test period should be the 12 months ending March 31,1954. In other words, March 31 was to be the cut-off period of this pattern year.
The reasoning of the Arkansas decision is unassailable and compelled by reasons of fairness.
IV. ATTRITION AND USE OF 1975 DATA
The majority contends that “its failure to account for continuing attrition” was arbitrary. However, it is patently clear that the Commission did not fail to account for attrition. The final order of the Commission is replete with comments that demonstrate its careful consideration of the evidence of attrition. It will be noted that the Commission plainly found in its order at pages 24 and 25:
In short, 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 real problem here is that the majority disagrees with the extent of attrition that the Commission recognized in its computation. That, of course, is simply a difference of judgment and is not demonstrably arbitrary or capricious. The best evidence upon which to conclude whether the Commission acted arbitrarily is to be found in a reading of its final order. Because I believe the final order to be self-explanato*156ry, copies of pages 23-28 inclusive of the order are attached hereto in an appendix to this dissent, as a typical sample of the order to assist the reader in judging whether the Commission acted reasonably or arbitrarily.
Some years ago, the practice of the Commission had been to use the average rate base for the test period. In order to combat the effects of attrition, an exception to the general rule was recognized so that when attrition was found to exist the rate-making authority could use a company’s year-end rate base to compensate for it. Telephone Users Association v. Public Service Commission, supra, 304 A.2d at 298, citing City of Lynchburg v. Chesapeake & Potomac Telephone Co., 200 Va. 706, 711, 107 S.E.2d 462, 469 (1959). See also Goodman v. Public Service Commission, supra. This is exactly what was done in the instant case. The Commission chose to follow this court’s suggestion in the Telephone Users case and, by and large, used the end-of-the-year rate base making adjustments when necessary for abnormally large end-of-the-year figures. It also made other adjustments in light of changes appearing in the company’s June 30, 1975, data.
A regulatory commission bases its final order on a consideration of all relevant data available for the test year. When updated figures following the test year are offered late in the hearing as part of the company’s rebuttal testimony, it must necessarily fall to the discretion of the Commission to decide how much consideration shall be accorded such evidence and to determine which items would seem to have a significant bearing on its projection of future operations. He who would upset its decision carries a heavy burden.
The Commission carefully examined the data for 1975 and began its consideration of the effect of the 1975 figures by noting: “Although 1975 operating data, of which we may take official notice, indicates a resumption of growth trend in retail kilowatt hour sales, it appears that the over 60% reduction in PJM sales is continuing . . . .” (Referring to Pennsylvania, New Jersey, Maryland Interchange sales [order at 6 and 7].) With regard to its consideration of embedded costs of debt capital the Commission noted that the experts agreed that the end-of-year figure for 1974 should be adjusted to reflect the retirement in August 1975 of $10 million in debt securities. (Order at 15.) It observed: “In determining the cost of debt that we have used in reaching our rate of return conclusion, we have recognized and accepted known changes from the December 31, 1974 figure.” It noted that a $50 million debt issue anticipated in 1975 by two witnesses was not made, but that Pepeo had chosen instead to meet its 1975 capital needs through short-term borrowings. Accordingly, it adjusted the 1974 embedded debt cost to reflect only the August 1975 debt retirement. The resulting figure arrived at of 6.97% was rounded to 7% in recognition that at “current costs” (1975) of debt capital, any new debt issue by Pepeo will necessarily increase the embedded figure (order at 16). In considering the cost of preferred stock, the Commission took into consideration the cost of the company’s preferred stock sale in April 1975 and that it involved a convertible preferred. (Id. at 16 and 17.) It concluded this part of its discussion by saying: “While we are reluctant to attempt to predict the future costs of debt and preferred stock, we cannot ignore current costs [1975]. We will therefore adjust the mathematically arrived at 9.05% rate of return to 9.1%, a feature which in our judgment is just and reasonable under today’s economic conditions.” (Id. at 20.)
Although Pepeo sought a 9.75% rate of return it has not contested the rate set by the Commission. Indeed it is the highest rate I have noticed in the reported cases.
In regard to attrition the Commission said:
The point is made by PEPCO that use of an end of period rate base will only partially reflect the “attrition” in earnings that has taken place since our 1973 PEPCO decision. We are not persuaded, however, that the decline in earnings has been due solely to attrition, but has in large part been due to the drop in sales noted previously. Since sales to retail *157customers appear to have resumed a somewhat normal growth pattern [in 1975], and since sales to PJM appear to have leveled off to a large degree, [1975] and since PEPCO has substantially reduced its construction budget [for 1975], it appears reasonable to conclude that attrition in the future may play a less significant role than it has in the past. [Id. at 25, 26.]
The “drop in sales” refers to the dramatic effect of the 1974 national energy crisis which resulted in a marked drop in sales of electricity as a result of the emphasis by the government and consumer groups on the need to conserve energy.
In discussing CWIP and M & S the Commission said:
The record shows wide fluctuations in these accounts over time and a substantial increase in fuel inventories in 1974, resulting from stockpiling due to the unusual fuel market in that year. The amounts at the end of the period in both accounts appear to be abnormally high. In view of PEPCO’s projected reduction in its construction program and the reduction in fuel inventory in 1975, we do not believe that the end period figures can be called representative of anticipated future conditions. The adjustment of materials and supplies is consistent with the Commission’s treatment accorded to this item in Formal Case No. 610 [Order at 25-26.]
Such thoughtful consideration of the relevant factors throughout the Commission’s opinion precludes a holding that its order was arbitrary. As was said in Goodman v. Public Service Commission, 162 U.S.App. D.C. 74, 82, 497 F.2d 661, 669 (1974): “Since the Commission chose between alternatives and achieved a reasonable result, we cannot disturb [its] findings.” •
The company and the majority opinion both emphasize the point that the Commission did not include the full December 31, 1974, figure of $359,000,0005 for construction work in progress (CWIP) instead of the weighted average used by the Commission of $284,000,000. This is a major contention of the majority which asserts that the Commission’s act in arriving at this figure was not merely an error of judgment but was arbitrary and capricious. I do not find this claim to be supported in the record. There is substantial evidence, as will be seen, to support the Commission in its decision to use the weighted average. The Commission was not faced with the simple question of whether or not to accept the company figures and the company’s method of computing the rate base. It had to consider all of the evidence on both sides including conflicting expert testimony and the arguments of intervenors against using full, face value, year-end CWIP. See note 1, supra.
The Commission was well aware that CWIP by its nature provides no service for the public nor any income for investors. In only a very few jurisdictions, including the District of Columbia, is CWIP included in the rate base.6 If it is included, it is for the purpose of providing the investor with a return for that part of his funds which are currently tied up in nonproducing plants. Many jurisdictions instead of using a figure for CWIP, use a figure that allows for funds used during construction (AFUDC) (Tr. at 1501; Tr. at 1116; Pepeo Exhibit 6, at 7; People’s Counsel brief at 21), or a figure that capitalizes the interest on funds used in construction. When new plants become operational and move out of CWIP into plant in service, they become revenue producing for the company after which time the investor must begin to bear the risk of profit or loss.
In considering this problem, the Kansas City Corporation Commission said:
If plant under construction were to be included in the rate base upon which a *158fair return is computed, equity would require inclusion also of the estimated additional revenue produced by such construction as operating revenue for the test period. Otherwise, existing telephone users would be forced to pay a return on property constructed for future subscribers with the result that when these future customers begin to receive service, the applicant would derive a double return on the cost of such construction.” [In re Southwestern Bell Telephone Co., 98 P.U.R.3d 30, 38 (1973).]
The evidence here indicated that during 1974 there had been an unusually large flow of dollars into CWIP from $197,000,000 on December 31, 1973, to $359,000,000 on December 31, 1974. In comparison the CWIP for year-end 1972 was only $95,000,-000. The anticipated annual average through 1977 was predicted to be $288,000,-000 (Staff Exhibit 4, at 28).
Since Pepeo operates in Maryland and Virginia as well as the District of Columbia, only those percentages of company figures properly allocated to the District of Columbia operation are used in computing the rate base for the District. For example, the figure for District of Columbia plant in service is computed by taking 44.82% of the total plant in service. Consequently, the company originally arrived at a figure of $657,634,000 or 44.82% of the total plant of $1,467,207,000.
Likewise, in computing CWIP only that part of the total figure attributable to the District of Columbia operation is used. Of the total of $377,508,000 claimed originally by the company, it allotted only $155,863,-000 in its computation of the District of Columbia rate base or 41.29%. Pepeo Exhibit 9, W 29 and W 30.
The staff used the same percentage figure for plant in service but allocated only 36.69% of total CWIP to the District of Columbia. See Staff Exhibit 4 SM-2, Sch. A, p. 1. On the other hand, the staff allocated 53.64% to the District of Columbia operation for plant held for future use. Id. The lower figure for CWIP may result from the fact that Chalk Point III, then under construction, is located in Aquasco, Maryland. Pepeo Exhibit 8, at 2-3.
People’s Counsel, citing examples of where only 60% of CWIP was used in some jurisdictions, recommended that the Commission adopt the rule followed in others that allow CWIP only up to 10% of the useful plant value. (People’s Counsel Exhibit C, at 38.) The League of Women Voters asked the Commission to return to its former policy still followed by a great many regulatory bodies of excluding CWIP altogether from the rate base (brief at 6).
In view of the unusually high year-end figures, the General Services Administration urged the Commission to use a weighted average figure for CWIP, as did the Commission staff. It argued that the high year-end figure should be adjusted to normalize it to reflect conditions that may reasonably be expected to be experienced during the period the rates will be in effect (brief at 5).
It added that Pepco’s proposed amount of $88,177,0007 for materials and supplies (M&S) is clearly excessive as demonstrated throughout the record.” (Exhibit G at 5, brief at 4.)
The principal Staff witness, a recognized expert whose qualifications were unassailed, testified that:
I do believe the rate base should be representative of what will take place in the future, and I think the averaging method for construction work in progress does just that.
It puts construction work in progress on a basis that we can anticipate will occur in the future and will be more representative of what is going on.
At the same time, we get the flow of dollars into the construction program as if it were on an interest during construction or AFUDC basis. [Tr. at 1458.]8
*159The Commission concluded at page 26 of its order:
We have given most serious consideration to all of these recommendations. We are disposed to agree with our Staff and accept Mr. Manheimer’s recommendation for the use of an average amount of construction work in progress and an average amount in the materials and supplies account in rate base as more representative of the flow of dollars in and out of the accounts. The record shows wide fluctuations in these accounts over time and a substantial increase in fuel inventories in 1974, resulting from stockpiling due to the unusual fuel market in that year. The amounts at the end of the period in both accounts appear to be abnormally high. In view of PEPCO’s projected reduction in its construction program and the reduction in fuel inventory in 1975, we do not believe that the end period figures can be called representative of anticipated future conditions. The adjustment of materials and supplies is consistent with the Commission’s treatment accorded to this item in Formal Case No. 610.
That reasoning seems to me to carry considerable logic and to be more than adequate to defeat any contention that the decision as to CWIP was arbitrary.
I agree with the Corporation Counsel’s contention that in exercising its ratemakihg responsibility the Commission is not bound to use any particular methodology, nor is it bound to adopt any particular alternative proposed. Goodman v. Public Service Commission, supra.
In Goodman the court held that:
In its ultimate determination of future revenue requirements, the Commission had a choice of two figures: 1) the average values applying throughout the test-year (“weighted” rate base); or 2) the values on the last day of the test-year (“end-of-period” rate base). [Id. 162 U.S. App.D.C. at 82, 497 F.2d at 669.]
Until today’s decision the correctness of that proposition has never been doubted by the courts in this jurisdiction.
V. 1976 OPERATING RESULTS UNDER THE DECEMBER 1975 RATE ORDER
Since the order herein setting increased rates became effective in December 1975, and it has taken this panel well over a year to resolve this case, we need not resort to speculation as to whether or not the rates established by the Commission might deny Pepeo an opportunity of earning a fair rate of return as asserted by the company. We need only examine what the actual earnings were for the year 1976 under the new rates.
On March 1, 1977, the Commission, in Formal Case No. 666 issued order No. 5866 authorizing Pepeo “to issue and sell up to 4,000,000 shares of its common stock, $10 par value . . . .” The order was based upon financial data supplied by the company in its application and supporting exhibits of which I can take notice9 it being a formal record of the Public Service Commission consisting of data prepared and filed by the company itself (28 B.C.Register 7254).
Attached to the application filed on January 28, 1977, was the company’s SEC form S-7 showing registration of the stock with the Securities & Exchange Commission. This exhibit reflected company annual net earnings of $1.16 per share as of December 31, 1975, which improved to $1.72 per share as of December 31, 1976, an increase of nearly 50%.
*160The market price of the stock was shown to be:
4th quarter 1975 low 10 high 12M
4th quarter 1976 low 1314 high 147/8
According to company figures the last transaction on January 26, 1977, was at 15%.
When the instant case was argued before the Commission in September 1975, Pepco’s counsel pointed out that the company’s common stock had been traded the day before at only $10V2. This means that in 16 months the stock increased approximately 50% in market value. Furthermore, according to these records, the company on January 21, 1977, raised its quarterly dividend from an annual rate of $1.16 per share to a rate of $1.28 per share.
In view of this self-proclaimed record of increased earnings, I would dispose of the majority’s assertions here that the conclusions of the Commission were arbitrary and the rates it set were confiscatory by reminding it of the Supreme Court’s admonition that:
“Estimates for tomorrow cannot ignore prices of today.” Southwestern Bell Telephone Co. v. Public Service Commission of Missouri [262 U.S. 276, 288, 43 S.Ct. 544, 67 L.Ed. 981]. We have said of an attempt by a utility to give prophecy the first place and experience the second 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. We say the same of a like attempt by officers of government prescribing rates to be effective in years when experience has spoken. A forecast gives us one rate. A survey gives another. To prefer the forecast to the survey is an arbitrary judgment. [West Ohio Gas v. Public Utilities Commission, supra, 294 U.S. at 82, 55 S.Ct. at 325.]
In this remand, the majority has blinded itself to the fact that “experience has spoken” in direct contradiction to its doomsday forecast.
Commission records reflect that a year later it granted Pepeo another and larger rate increase on December 16,1976, of $29.4 million which should reflect even better results for the company in its 1977 earnings.10 That case is presently pending in this court on an appeal taken by an intervenor.
VI. REMEDY
After vacating this order, the majority states that it remands the case with directions to the Commission to “calculate modified rates . . . 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.” I am at a loss to understand the majority’s discussion of “losses” or how it expects them to be calculated. If the remand contemplates the company being authorized to charge higher rates in the future in order to recoup past losses (1975), it would be contrary to the law in this jurisdiction. Payne v. Washington Metropolitan Area Transit Commission, 134 U.S.App.D.C. 321, 333, 415 F.2d 901, 913 (1968).
Although the remand is something less than specific, one point comes through quite clearly, that is the majority is directing the Commission to accept all of the company’s figures ending June 30, 1975, at face value despite the limited examination accorded them by the Commission staff and the fact that coming in late they were not the subject of counter testimony and comment by any of the staff or intervenors’ witnesses. This seems to be the equivalent of ordering the Commission to accept the company’s updated figures and based thereon to grant the company the full amount of increased revenues it requested of well over $20 million. I find this unprecedented and a wholly unwarranted assumption by this court of the functions of the regulatory body.
As to how far a reviewing court may go, the Supreme Court has said:
More important, we have heretofore emphasized that Congress has entrusted the regulation of the natural gas industry to the informed judgment of the Commis*161sion, and not to the preferences of reviewing courts. A presumption of validity therefore attaches to each exercise of the Commission’s expertise, and those who would overturn the Commission’s judgment undertake “the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences.” FPC v. Hope Natural Gas Co., supra [320 U.S.] at 602 [64 S.Ct. 281]. . . .
Moreover, this Court has often acknowledged that the Commission is not required by the Constitution or the Natural Gas Act to adopt as just and reasonable any particular rate level; rather, courts are without authority to set aside any rate selected by the Commission which is within a “zone of reasonableness.” FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 585, 62 S.Ct. 736, 743, 86 L.Ed. 1037. No other rule would be consonant with the broad responsibilities given to the Commission by Congress; it must be free, within the limitations imposed by pertinent constitutional and statutory commands, to devise methods of regulation capable of equitably reconciling diverse and conflicting interests. [Permian Basin Area Rate Cases, supra, 390 U.S. at 767, 88 S.Ct. at 1360.]
See also Federal Power Commission v. Transcontinental Gas Pipe Line, 423 U.S. 326, 331, 96 S.Ct. 579, 46 L.Ed.2d 533 (1976) (per curiam).
In Telephone Users Association v. Public Service Commission, supra, this court held that because the Commission failed to make adequate findings based on evidence in the record regarding the utility’s claim of attrition, the case had to be remanded for the Commission to make those required findings. We specifically noted that:
We are not tqday holding that C&P’s evidence in the record requires a finding by the Commission of attrition, or that if the Commission finds attrition it would be compelled to use C&P’s year-end rather than its weighted average rate base. [Id. 304 A.2d at 301 (footnote omitted) (emphasis in the original).]
Those words are overruled by today’s decision. The majority’s remand order in the instant appeal fails to recognize the critical distinction between telling the Commission where it erred and to reconsider its decision, and directing the Commission to arrive at new rates based on updated company figures some of which the Commission may not have found acceptable. This court’s role ends when the error has been pointed out and the case remanded for the agency to apply its expertise in correcting the error. An appellate court cannot dictate the result the agency must reach.
“The court’s responsibility is not to supplant the Commission’s balance of these [factors] with one more nearly to its liking, but instead to assure itself that the Commission has given reasoned consideration to each of the pertinent factors.” Permian Basin Area Rate Cases, supra 390 U.S. at 792, 88 S.Ct. at 1373.
The scope of the remand order here so far exceeds the power of this court that it goes a long way toward making us a superregu-latory commission even though we are devoid of regulatory expertise.
The majority’s act of directing the Commission to compute the new rates on specified company figures is done, no doubt, to avoid a rehearing by the Commission on remand, which at this late date would necessarily be a cumbersome and confusing administrative tangle. The Commission, on remand, would be compelled to use the June 30, 1975 figures even though on a later Pepeo rate application in December 1975 it has already issued an order (in December 1976) granting another company rate increase based on all of calendar year 1975 including the identical data for the first six months of 1975 in issue here. By ordering the Commission to add substantially to the company’s revenues with revised rates retroactively back to December 1975, the majority puts in serious question the validity of the later rate order of December 1976 which was based on a full 1975 test year. Since the company did not in fact experience a deficit in 1976, under the rates here in issue, but more than met its operating *162expenses for that year with a handsome net income left, over, the added revenues of more than $20,000,000 from the surcharge ordered by the majority would constitute additional net profit for 1976. Will company customers petition for a revision downward of the December 1976 rate order in light of the very substantial revision upward in company earnings for 1976 resulting from this remand, and would the customers assert claims against Pepeo for the overcharges in 1977 resulting from the now erroneous December 1976 rate increase? Will today’s new customers who are assessed this surcharge to make up the $20 million in revenues for 1976 claim an exemption as not having received any Pepeo service that year?
The pending appeal of the December 1976 order will be proceeding on a record that is no longer valid unless remanded first for a further hearing and revision of the order. The surcharge levied here for 1976 could be followed by a rebate to customers for over-payments in 1977. When do rates become final and litigation come to an end?
In any event, it now appears that a remand would be useless. Although the majority has denied the Commission’s motion to dismiss for mootness, the fact remains that the order appealed from, No. 5739, no longer is of any real force or effect having been superseded on December 16, 1976, by order No. 5849 under which the company is now operating. That order awarded the company a further increase designed to produce an additional $29.4 million in revenues. Consequently the company already has been awarded an increase of well over $5 million more than it seeks in this appeal. As a result if this case is to be remanded to the Commission it can afford Pepeo no greater measure of relief than that already granted.
When a similar problem was faced by the Circuit upon its holding that an increase in gas rates was invalid, the court said:
These matters having been disposed of by this opinion insofar as it is possible now to do so, very little will be left which could be remanded to the Commission, especially as any possible remaining issues are also restricted by a new application of the Company to the Commission for a rate increase, filed since argument of these appeals, and of which we take judicial notice. Remand to the Commission, in the circumstances of this case, could not be to enable a rate order to be superimposed upon the old application, filed July 14, 1949. [Washington Gas Light Co. v. Baker, 90 U.S.App.D.C. 98, 104, 195 F.2d 29, 35 (1951).]
It is difficult to perceive how the Commission could grant further affirmative relief on the application for an increase in revenues at issue in this appeal.
I submit that the reversal here is not only wholly unjustified, but it creates an administrative nightmare. For all of the foregoing reasons, I dissent. I would dismiss the appeal and affirm the order of the Commission.
APPENDIX
Order No. 5739
The next issue we must address under the heading of rate base is the perennial question of whether to use average or end of period figures. There is not, and indeed there cannot be any question on this record that PEPCO has experienced a decline in earnings in the latter half of 1974 and that this declining trend shows no signs of a reversal. This fact, of course, does not in and of itself demonstrate the presence of “attrition.” As the Commission said in the last PEPCO rate case “while a decline in rate of return may be the result of attrition, it may with equal validity be said to result from other factors, e. g., imprudent investment or excessive expenses.”
As we have indicated in our preliminary views, it appears to us. that the major factors contributing to PEPCO’s decline in earnings were the reduction in kilowatt sales to retail customers and the significant drop in sales to PJM. Putting these two factors aside, however, the record is clear that the increase in investment costs per unit of output noted in our last decision has *163continued; and in this case not only is this fact demonstrated by the actual dollar investment figures in the record but it is confirmed, we believe, by the vigorous advocacy on the part of consumer intervenors of the use of marginal or long run incremental cost figures for rate making purposes. The underlying theory of this advocacy is that the cost of new production plant is higher than the average embedded cost of that plant. Thus, while we are urged by some parties to match revenue, expense and rate base by using average rate base figures, we find little support in the record for those recommendations. In short, 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 point is made by PEPCO that use of an end of period rate base will only partially reflect the “attrition” in earnings that has taken place since our 1973 PEPCO decision. We are not persuaded, however, that the decline in earnings has been due solely to attrition, but has in large part been due to the drop in sales noted previously. Since sales to retail customers appear to have resumed a somewhat normal growth pattern, and since sales to PJM appear to have leveled off to a large degree, and since PEPCO has substantially reduced its construction budget it appears reasonable to conclude that attrition in the future may play a less significant role than it has in the past.
A number of adjustments to rate base have been presented for consideration by our Staff and by several of the intervening parties in this case. People’s Counsel witness McCabe, for example, with the support of other consumer parties, has urged elimination of construction work in progress from the rate base and substitution of an allowance for funds used during construction (AFUDC). Our Chief Accountant, Mr. Manheimer, noting the unusually large amounts included in construction work in progress at year end, has recommended averaging construction work in progress over the test period. Intervenor All Souls Unitarian Church has urged that PEPCO’s investment in the Douglas Point nuclear station be eliminated from rate base. Mr. Manheimer also recommends that we average materials and supplies over the test period, and that we eliminate amounts reflecting preliminary surveys, land transactions undistributed, prepaid insurance, and compensating bank balances, in our calculation of rate base.
We have given most serious consideration to all of these recommendations. We are disposed to agree with our Staff and accept Mr. Manheimer’s recommendation for the use of an average amount of construction work in progress and an average amount in the materials and supplies account in rate base as more representative of the flow of dollars in and out of the accounts. The record shows wide fluctuations in these accounts over time and a substantial increase in fuel inventories in 1974, resulting from stockpiling due to the unusual fuel market in that year. The amounts at the end of the period in both accounts appear to be abnormally high. In view of PEPCO’s projected reduction in its construction program and the reduction in fuel inventory in 1975, we do not believe that the end period figures can be called representative of anticipated future conditions. The adjustment of materials and supplies is consistent with the Commission’s treatment accorded to this item in Formal Case No. 610.
With regard to Mr. McCabe’s recommendation that construction work in progress be excluded from rate base (a recommendation subsequently modified to permit 10% of plant in service to be included as a construction work in progress allowance) we are disturbed by two factors. First, the 10% allowance appears to us to be wholly arbitrary and without foundation. Second, we would note that including CWIP in rate base without AFUDC and capitalizing AFUDC but excluding CWIP from rate base produce about the same ultimate result. Essentially only the timing is different; but in the long run, use of AFUDC may result in a greater overall cost to the *164customer than inclusion in the rate base of construction work in progress. Projects begun in the period between rate cases, for example, earn no return under the CWIP approach, and if placed in service prior to the next rate case appear in rate base at the actual cost of the project. Were AFUDC used, the same project would appear in rate base at the cost of the project plus capitalized interest, and ratepayers would be required to provide a return on that higher cost. In consideration of all factors, we believe that the interest of both customer and investor would be better served by continuing our long standing practice of allowing PEPCO to include construction work in progress in its rate base.
With regard to the Douglas Point nuclear project, there is no question but that substantial funds have been invested in that project, and that nuclear projects require an extraordinarily long lead time required to plan and complete. We understand and appreciate the views expressed by All Souls witness Father Millard in support of his recommendation that the $28.6 million already invested in Douglas Point now be excluded from rate base. In consideration of current fuel uncertainties and the 8 year or longer lead time, however, we are not convinced that we should at this time declare the nuclear project imprudent or unnecessary.
We are disposed to agree with our Chief Accountant that amounts reflecting preliminary surveys and undistributed land transactions should not be included in rate base. As Mr. Manheimer has pointed out, there is no certainty that any of these amounts will be transferred to plant in service and for that reason we believe their exclusion is appropriate. Similarly, we agree with Mr. Manheimer that prepaid insurance premiums and compensation bank balances should be excluded from rate base, since insurance premiums are expensed over time and compensating bank balances are in our view more properly a part of the cost of money and have been included in our calculations of fair rate of return.
For these reasons, then, and having considered all data and recommendations of record, we find the appropriate District of Columbia rate base to be $650,091,000, as shown on Attachment A, Page 1.
To achieve a 9.1% rate of return on a rate base of $650,091,000, PEPCO’s operations must produce a return of $59,158,000, as shown on Attachment A, Page 3. We turn now to consideration of observed expenses and operating results, from which we may determine the amount of revenues needed to produce this net return.
. D.C.Code 1973, § 43-706, provides:
In the determination of any appeal from an order or decision of the Commission the review by the court shall be limited to questions of law, including constitutional questions; and the findings of fact by the Commission shall be conclusive unless it shall appear that such findings of the Commission are unreasonable, arbitrary, or capricious.
. See, for example, P.C. Exhibit A, 39-43; Exhibit 10; Commission Order at 25-26; Staff Exhibit 4, 24-28; transcript at 1111, 1112, 1457-1484, 2516; Staff Exhibit 4, sch. A; GSA Exhibit 21 at 4; GSA Exhibit 22 at 1-3; GSA Exhibit 22A at 11-13; GSA brief with the Commission at 4, 5, 10, 25, 29; and P.C. brief on appeal at 11-17.
. If the majority would not blind itself to “the return actually earned” by Pepeo in 1976 under the new rates, it would have to discard the label of “confiscatory.” See section V., infra.
. See section V., infra.
. That figure represents over 29% of Pepco’s gross utility plant. (Testimony of J. McCabe, III, P.C. Exhibit C at 36.) CWIP formed only 9% of the rate base in 1972 and the average for 1970-1974 was 13.17% (P.C. Exhibit M at 3).
. Tr. at 1501.
. Only 42.91% of this figure would be applicable to the District of Columbia operation.
. The company itself admitted that Pepco’s 1975-1978 construction budget was drastically *159slashed due to changed forecasts of customer demand over the next several years (brief at 9).
. Washington Gas Light Co. v. Baker, 90 U.S.App.D.C. 98, 104, 195 F.2d 29, 35 (1951); Commonwealth v. United States Steel Corp., 10 Pa.Cmwlth. 408, 410, 311 A.2d 170, 172 (1973). This is not a taking of judicial notice of evidence that the hearing agency could have used in establishing a rate base or in deciding what a fair rate of return would be, but merely is the taking of a realistic, after the fact, view of the results of an allegedly confiscatory rate order.
. See order No. 5849, 22 D.C.Register 4147.
.The argument forwarded by the Commission that “the proceedings must end at some point” is unpersuasive in this context. The new data were submitted five months prior to the issuance of the Commission’s opinion, and before the close of the hearings. Moreover, they *167constituted the most recent available data, which, among other precedents, West Ohio Gas Co. v. Public Utilities Comm’n, supra, 294 U.S. at 82, 55 S.Ct. 324, and Telephone Users Ass’n v. Public Comm’n, supra, 304 A.2d at 297, requires to be given serious consideration. Here they were effectively ignored.