(1960), D. C. Code 1961, § 1410, et seq., hereafter referred to as the Compact. Petitioners are residents of the District of Columbia and Maryland, and they and the groups they represent are regular riders of buses operated by the D. C. Transit System, Inc., in said District, and they, and persons similarly situated, are affected and aggrieved by Order No. 684, entered March 13, 1967, by the Washington Metropolitan Area Transit Commission (hereafter referred to as the Commission), increasing bus fares in the District of Columbia. Petitioners, pursuant to § 16 of the Compact, supra, filed with the Commission an application in writing requesting reconsideration of its Order No. 684 and stating specifically the errors claimed as grounds for such reconsideration. The said motion for reconsideration was denied on April 12, 1967, by Commission Order No. 691. On May 10, 1967 petitioners filed a petition for review of Order No. 684 with this court. STATEMENT OF THE CASE October 17, 1966 D. C. Transit filed an application with the Commission seeking authority for a new and substantially higher rate structure. The new tariffs proposed by Transit raised the price of tokens from 4 for 85 cents to 4 for $1. They added a 5-cent transfer charge, and generally increased zone and express rates both within and without the District. Fares in some outermost Maryland zones were actually reduced, how ever. The Commission directed a public hearing and suspended Transit's proposed new tariffs until February 13, 1967. Following a series of hearings, the Commission published its Order No. 656 on January 12, 1967 in which it directed the immediate implementation of a new and in creased fare structure on a temporary basis pending further inquiry into a fair rate of return. The fare structure approved in "interim" order No. 656 was substantially different from that proposed by Transit. The token price was set at 4 for 95 cents, the transfer charge was eliminated, and the requests for increased fares for Suburban operations were generally scaled down. Order 656 was stayed by this court and is under review here in No. 20714. After further hearings, the Commission entered its final Order No. 684 here under review. The rate structure it approves is essentially the same as interim Order 656 except that tokns are set at 4 for 98 cents instead of 4 for 95 cents as in Order 656. Other facts of the case are sufficiently delineated by the Commission in its respective orders and the arguments here to be presented. STATEMENT OF POINTS The grounds upon which petitioners seek relief are detailed in their petition to the Commission for Reconsideration of Order No. 684 and previous motions incorporated by reference therein. For the sake of brevity, those grounds may be conveniently considered under the following headings: 1. In fixing a fair return, the Commission failed to make adequate inquiry into relevant data, and failed to accord sufficient weight to important economic factors. . 2. In designing the rate structure, the Commission failed to make adequate inquiry into relevant facts and failed to give sufficient attention and weight to factors which tended to indicate that the fare structure was unfair and discriminatory. SUMMARY OF ARGUMENT The Commission has not yet completed the broad inquiry into rate of return called for by this court in D.C. v. WMATC, 121 U.S. App. D.C. 375, 359 F. 2d 753 (1965). The record is little better in this regard now than it was when the Commission frankly confessed its inadequacy in entering interim order 656. The only addition to the record is expert testimony applying a single narrow economic theory of "Alternative Use Value." This is only one of many possible rate of return theories. Its principal advantage-giving effect to present market values of fixed assets is also its principal disadvantage for, by so doing, rates increase automatically with land appreciation, an admittedly undesirable result. Since the expert steadfastly refused to extend his analysis beyond the horizons of this sectarian viewpoint, the broad analysis called for by the Court is still incomplete. The record now is even scantier than before since the narrow limits of the expert's theories have been fully exposed. Indeed the testimony of the expert has raised far more questions than it has answered. Rate Structure Because there are no comparative analyses of costs and earnings by route, it is impossible to set a rate structure which is non-discriminatory. While net earnings may not be the sole basis for setting fares, to set fares without taking this factor into consideration at all is clearly wrong.1 Moreover, it would seem that this wrong falls heaviest on the poor of this city. They live generally in the most densely populated parts of the city. Bus operations in these areas are the most profitable because (a) buses are loaded 1 Cf. City of Detroit v. FPC, 97 U.S. App. D.C. 260, 230 F. 2d 810, 818-19, and Willmut Gas and Oil Company v. FPC, 112 U.S. App. D.C. 27, 299 F. 2d 111, illustrating that, while not controlling, a cost analysis is a required point of departure in rate making. more fully, (b) they are more likely to be used in off-peak hours, and (c) the equipment used is older and cheaper. There is circumstantial evidence for these conclusions in the comparisons between D.C. and Maryland operations. From this, it would appear that District of Columbia operations are subsidizing the Maryland operation. If, as it seems, the more densely populated areas are the most profitable, we are led to the further conclusion that the poor are subsidizing the rich! If, as the Commission claims, such a conclusion is "speculative" on the present record, it in effect concedes legal error in failing to insure adequacy of the record in this regard: "In this case, as in many others, the Commission has claimed to be the representative of the public interest. This role does not permit it to act as an umpire blandly calling balls and strikes for adversaries appearing before it; the right of the public must receive active and affirmative protection at the hands of the Commission." This and the many other quotes and citations on this point collected in Scenic Hudson v. FPC, 354 F. 2d 608, 620 et seq. (CA 2), illustrate the affirmative duty on the Commission to inquire when reasonable questions are raised as they were in this case. Significantly reduced fares are plainly called for in certain sections of our city. Where and how much cannot be now determined. The Commission should undertake such a study before setting any new rates. ARGUMENT 1. FAIR RETURN Why is Transit permitted to earn, consistently, year after year more than a 100 percent annual return on its original $500,000 investment? Where in the record of these hearings are the answers to the Citizens Council memorandum to the Board of Commissions of December 16, 1966: We have recorded above. . . the amazing procedure by which D.C. Transit bought Capital Transit with only $500,000. The rest of the purchase price consisted of mortgages on the assets being purchased, namely the cash, the personalty and the realty... We admire such financial skill. We have also recorded above... D.C. Transit's financial manipulations and success in paying off the entire purchase debt and interest in three years, four and a half months-all of it coming out of cash flow from operating revenues, perhaps with an assist from the sale of the Fourth Street car barns. . . . Payment of the debt from revenue made crystal clear the fact that the bus riders paid for the company, except for the original $500,000, and that the stockholder's total investment and total financial interest was that same $500,000. The Congressional franchise provision for "such return as to make the Corporation an attractive investment" [Compact, § 6(a)(4)] thus has to refer to the return on the only investment made by the stockholder, namely $500,000. Considering that the operation is dedicated to the public welfare, and is a government protected monopoly with many tax exemptions, a 62 percent return on the original investment seems quite adequate. This makes $12,153.74 for the 42 months in 1956 and $32,500.00 per year thereafter. . . . [But] the above pages. . . show dividend payments of $290,000 for the year ending December 1957 and $400,000 for that ending December 1958. Broken down on the above rate of return, this $690,000 equals $77,153.74 for the 62 percent return on investment, $500,000 for the return or reimbursement of the capi |