The Philadelphia Inquirer from Philadelphia, Pennsylvania • Page 42

business Friday, July 3. 1981 8-C CiY iriYZ hire lawyer to challenge PGW rate request expert in energy matters to act in the "consumer interest" at hearings on the proposed rate increase. The hearings are expected to take place in August. In addition, Borish said, the commission plans to hire a major accounting firm to help the new consumer advocate assess the four-inch-thick stack of highly technical documents that PGW filed with the commission on June 19 to justify its request. The accountants also will be meeting, delayed approving PGW's proposed $496 million operating budget for fiscal 1982 because the budget included expected revenues from the proposed rate increase.

The utility was told to do business as if it were operating under its 1981 budget, which is about 16 percent smaller, with a small allowance made for increased employee wages. Borish said at the same meeting that the commission would no longer permit PGW to change its fuel-adjust- ment charge for raw materials on a monthly basis. Instead, he said, changes would be permitted only once or twice a year. Since February, the charge has almost doubled, from 16 cents per hundred cubic feet to 29 cents, triggering numerous protests by customers. The Consumer Educational and Protective Association, known as CEPA, has led organized demonstrations against the rate increase, and its members crowded the City Hall hearing room yesterday.

hearing of City Council's Rules Committee and represent the latest change for the five-member commission since Borish, a senior partner in the law firm of Wolf, Block, Schorr Solis-Cohen, took over as chairman earlier this year after being appointed by Mayor Green. (The five-member commission consists of the city controller and two members appointed by the mayor and two by the City Council.) The commission, at its June 25 looking for waste and mismanagement at the utility, which is managed by a private firm under contract. PGW says it needs the new money to cover $29 million in increased operating costs; a $30 million cash shortfall resulting from delinquent payments by consumers, and another $30 million for capital improvements that in the past had been paid for through loans. The plans to hire a consumer advocate were outlined by Borish at a By Mike Leary bHpam sun wniCT The city's Gas Commission intends to hire a consumer advocate "to challenge all the underlying assumptions" that the Philadelphia Gas Works (PGW) is using in seeking an $89 million rate increase, commission chairman Bernard M. Borish said yesterday.

Borish said that the commission, which oversees the city-owned utility, was searching for a lawyer who is DOE hires Pennunit in suit Wharton gets role in oil costs case 1 pil XT 00 Ir Philadelphia Inquirar MICHAEL VIOLA A worker at Lukens Steel in Coatesville polishes rough spots on a tank-enclosure part; Lukens' 2d-quarter orders are off, but its backlog has been reduced Steel futures Area makers unsure if slump is seasonal or sign of trouble Reagan challenged on claim policy has Mped the industry By Larry Reibstein inquirer Stuff Writer In what was described as the first contract of its type, the U.S. Energy Department has hired the University of Pennsylvania's Wharton School to help in the government's legal attempt to recover millions of dollars in alleged pricing violations by major oil companies. Under the $2.2 million contract announced yesterday, the Wharton Analysis Center, a research unit at Wharton, will analyze oil production statistics and economics to help the government prove that the oil companies were overcharging in 1975 and 1976 when crude oil prices were controlled by federal regulations. Lawrence S. Mayer, the center's director, said the research would focus primarily on three cases pending since 1978 against Exxon, Texaco and Pennzoil.

The Exxon case, in which the government is seeking to recover $1 billion in overcharges, is the largest civil case ever filed, Mayer said. "The Department of Energy has limited technical research capability and for the first time lit is) coming to a university for help," Mayer said in a telephone interview. "These issues are so technical they are saying they need additional support." Mayer called the research technical and scientific and said it was conceivable thaLJhe center would reach conclusions favorable to the oil companies. "We're not on anyone's side," he said. But Carl Corrallo, a lawyer with the Office of Special Counsel of the Energy Department (DOE) in Washington, said he expected Wharton's research to help the government's case.

"We're not buying a pig in the poke here," he said in a telephone interview. "I don't expect a lot of surprises." For the Wharton center, the two-year contract represents about half of its total budget and thus a major boost to the two-year-old center, which analyzes energy-related issues for public and private sector groups. Wharton Dean Donald C. Carroll said in a statement that the contract is one of the largest ever received by a business school. Wharton received a total of $12 million in research contracts from specific groups for 1981.

The three cases at issue are just part of the government's effort to recover about $10.7 billion in overcharges allegedly made by the oil companies from 1974 through 1980. In January, President Reagan decontrolled the price of oil in one of his first acts as president. The efforts to collect the previous alleged overcharges, however, are in doubt because the Reagan administration's budget proposals would cut 80 percent of the DOE enforcement unit's funds. Corrallo said, however, that the three cases are of "high enough priority" and have advanced far enough in the legal process so that even reduced funding in fiscal 1982 would permit them to continue. It may still be years before the cases are settled.

The cases against Exxon and Pennzoil are in federal district courts; the Texaco case is an administrative matter within thp DOF The cases revolve around whether the oil companies circumvented federal regulations involving the pricing and production of "old" oil, which bore a lower price than more newly discovered oil. On June 23 he told a White House meeting of House Democrats, whose votes he wanted on his budget and tax proposals: "I've just received a report in the last few days from 15 major steel companies. These 15 companies, between them, are planning a number of modernization and rehabilitation and expansion projects that total $3.2 billion. "And all of this was planned and decided upon, in their report they say, with the expectation that the economic package is going to be passed. Just simply the promise of it has brought that about after (See GROWTH on 11-C) ally one of the strongest of any calendar year.

What industry sources are now having trouble determining is whether the slowdown will fit with normal seasonal trends or whether the soggy level of second-quarter bookings will cause the decline to be more pronounced. Despite the softening trend, few workers at area facilities have been laid off, although the the work force at the Fairless Works of U.S. Steel the region's largest plant, is a notable exception. Citing the weak order book, the big mill (See STEEL on 11-C) By Saul Friedman Inquirer Washington Bureau WASHINGTON President Reagan was delighted when Commerce Secretary Malcolm Baldrige mentioned what he had heard from the steel industry, because what Baldridge had heard seemed to confirm that the economic program was already beginning to work. Baldrige and the White House staff put the information in a memo; and the President, who often uses obscure references, to prove a point, talked about it the first chance he got.

By Martin J. Sikora Inquirer SUf Wilier The area's steel producers are digging in for a slow third quarter after experiencing nearly three months of a flat to softening rate of new orders. Shipments in the third quarter, which includes July, August and September, traditionally touch the lowest points of the year because of vacation shutdowns at steel mills and at customers' plants. It is not uncommon, industry experts say, for third-quarter volume to slide by about 2 million tons from the second quarter. For the steel industry, a second quarter is usu Stocks continue dropping as prime rate rises ground.

The exchange's composite index tumbled 0.64 to 74.73. After having absorbed six days of losses, the market made an attempt at a technical rally early in yesterday's session. But that rally quickly faded when Chase Manhattan Bank of New York and First National Bank of Chicago raised their prime lending rates from 20 to 20'2 percent. "Federal Reserve watchers have hppn knocked ross-eved bv the evra- twice the rate of other funds since January, he said. Conoco led the active list, up 1 at 69.

The company is fighting a bid by Seagram Co. for a large chunk of its stock. Big Board volume totaled 45.10 million shares, down from 49.08 million Wednesday. Standard Poor's index of 400 industrials dropped 1.28 to 144.67, and 500-stock composite index was down 1.13 at 128.64. At the American Stock Exchange, the market value index fell 5.04 to 366.84.

The NASDAQ composite index for the over-the-counter market closed at 212.80, down 1.83. tions of the money markets in the past few weeks," said Robert Stovall at Dean Witter Reynolds Inc. To further confuse the picture, while the prime was going up, some open-market interest rates declined during the day. Prices of long-term government bonds, which move inversely with interest rates, showed gains of $10 or better for every $1,000 in face value. Several stocks considered especially sensitive iu iiitcicat-iaie 9011153 showed up on the active list.

Federal National Mortgage was down Vi at 9 as of the close in New York, and American Telephone Telegraph dropped 's to 55. Among bank issues, Citicorp lost to 25; Chase Manhattan Vi to 53, and J.P. Morgan to 57. Bankame-rica, however, held steady at 24. With interest rates remaining high and volatile, money-market mutual funds continued to attract large sums in the week ended Wednesday.

Donoghue's Money Fund Report of Holliston, said assets of the funds climbed $2.1 billion to a record $126.5 billion. Their average seven-day yield slipped from 17.05 to 16.73 percent. Publisher William E. Donoghue made note of what he described as a "flight to safety" within the industry. Assets of funds investing only in U.S.

government securities have grown at Auoctated Prej NEW YORK The stock market, in the midst of its worst decline of the yoar, absorbed its seventh straight loss yesterday as two large banks raised their prime lending rates. Trading was moderate on the eve of the three-day Independence Day weekend. The Dow Jones average of 30 indus- 11 Idld 1W11 O.I IVi AkO 1VJ close since it finished at 954.40 on March 25. Since June 23 the average has fallen 47.47 points. The daily tally on the New York Stock Exchange showed more than two losers for every stock that gained All financial exchanges and markets will be closed today for the July 4 holiday.

High interest, N. J. regulations jeopardize plans for MGM casino-hotel include casinos planned by Hilton Hotels, the Trump Organization and Holiday Inns, as well as the proposed Caesars Palace on the old Traymore Hotel site. He said projects that have been held up by financing problems include proposals to convert the Ritz and Shelburne facilities and plans for new hotels sponsored by the Penthouse magazine organization, the Dunes Hotel and American Leisure Corp. In addition, Roffman said.

Golden Nugget gave up plans for a second casino by selling back land near the Steel Pier to Resorts International Inc. commission regulations cut into their freedom to make basic business judgments. "When you make a $200 million to $300 million investment at today's interest rates, you want to have business prerogatives, while still maintaining the integrity of the Igambl-ingl game," he said. "You want to have a free hand to make prudent business judgments. These rules are inhibiting the businessman's judgments." Roffman said at least four other projects have been delayed because of high interest rates and the "unfavorable regulatory climate." These posed by a reporter.

However, he said, the response fully reflected MGM's dissatisfaction with credit costs and with regulatory requirements that casino operators contend are impairing their profitability. Benninger said the board would take another look at the Atlantic City project after reconstruction of its MGM Grand Hotel in Las Vegas, which is scheduled to be finished by July 30, and after completion of a $55 million, 706-room addition at the end of September. The Las Vegas hotel was severely damaged by fire in November. The MGM Grand chairman said the company especially disliked New Jersey regulations that mandate the number of people who must be employed in all phases of casino-hotel operations, and that require security checks for all workers, including service personnel who have no connection with the actual gambling floor. The spokesman for Benninger said the chairman believed that these requirements contribute to overstaf-fing and unnecessary expenses.

Marvin Roffman, gambling stock analyst for Janney Montgomery Scott in Philadelphia, said most casino managers were upset because the By Martin J. Sikora Inquirer Slotf Writer The plan of MGM Grand Hotels Inc. to build a $200 million, casino-hotel in Atlantic City may be in jeopardy, the company's chairman indicated yesterday. Chairman Fred Benninger said in York that directors of the Las egas-based company would review project later this year. "If I had to make the decision today, I would say no," Benninger told reporters after a presentation to financial analysts.

Benninger said that a decision to proceed could depend on a decline in interest rates and a relaxation of -what MGM Grand and other present and prospective gambling operators consider overly stringent regulations by the New Jersey Casino Control Commission. If the MGM project is scratched or postponed, it would be among approximately 10 proposed casinos that are in various states of delay because the sponsors are balking at regulations or having trouble arranging financing. A spokesman for Benninger cautioned that his statement about not proceeding right now was a direct answer to a "hypothetical question".