The mayor's worries became acute late yesterday when he was advised that Secy. of Interior [Harold] Ickes does not approve "Plan E"–which city officials submitted in the hope that it would comply with the terms of the Raker Act. Under "Plan E" the city proposed to lease the P.G.E. system for municipal distribution of Hetch Hetchy power.

Mr. Ickes made public a letter to Mayor Rossi (which the mayor has not yet received) listing his objections. This confirmed predictions published in The News last week.

Of "Plan E," Secretary Ickes wrote: "I am not satisfied that it constitutes substantial compliance in good faith with the letter and spirit of the Raker Act as construed by the Supreme Court.

"The court held that 'the grant to the city was made upon the mandatory condition that this power be sold solely and exclusively by the city directly to the consumers and without private profit in order to bring it into direct competition with adjacent privately owned utilities.'

"It held that 'the regulatory conditions were designed to insure distribution of power from Hetch Hetchy through a municipal system in San Francisco' ... in the belief that consumers would thus be afforded power at cheap rates in competition with private power companies, particularly P.G.&E."

So stating, Mr. Ickes added he would call an open hearing on the whole matter, at which city officials and "other interested parties" could appear.

While Mayor Rossi worried about the budget, Public Utilities Mgr. Cahill became belligerent. "As far as I am concerned," he said, "I favor signing the lease with the P.G.&E. and letting Ickes take it to the courts."

The Raker Act granted the city public domain rights to develop the Hetch Hetchy system. It specifies that the power must be distributed municipally. The P.G.&E. has been paying $2,400,000 for the power under a so-called agency contract.

This has been ruled illegal by the Supreme Court, but an extension of time to June 30 was given so the city could prepare a substitute plan. This was "Plan E."

Since the conference with Mr. Ickes probably will be on when the deadline expires, Mayor Rossi was hopeful that another extension would be granted and the city would still be collecting the $2,400,000.