2. Reproduction cost as measure.

In Re Spring Valley Utilities Co. No. 8387, Nov. 5, 1919, the Illinois Commission said: "The reproduction cost of a property, as of a given date, should very properly be considered in determining the value for rate-making purposes."

In Re Chicago Teleph. Co. (Ind.) Nos. 4406-4413, Feb. 9, 1919, it was held that while the utility is entitled to earn a reasonable return upon the fair value of its property at the time of the inquiry, this does not necessarily mean that the controlling element in fixing such value should be the cost of reproduction at that time.

3. Outstanding securities as measure.

In Re Oregon-Washington Teleph. Co. File U-F-242, P. S. C. Or. Order No. 556, Nov. 29, 1919, the Oregon Commission, in a rate case, said that it was concerned with the fair value of the property rather than the amount of stock or bonds issued or the amount derived from the sale thereof.

4. Sale price as measure.

In Re Moscow Teleph. & Teleg. Co. Case F-278, Order No. 682, April 5, 1920, the Idaho Commission said: "Purchase price is entitled to some weight, but the Commission cannot fathom the mind of the purchaser to discover what conditions or considerations may have influenced his judgment in making the purchase. There is some testimony that applicant herein may have attributed some value to business subsidiary to, but not necessarily a part of, the telephone system he purchased."

5. Assessed value as measure.

In Re Eastern Montana Light & P. Co. Docket No. 733, Report and Order No. 275, Nov. 29, 1919, the Montana Commission said: "We have found that valuations of utilities submitted for assessment purposes are low and the intangible values are not included. The valuations are, therefore, not a fair and reasonable basis to use for rate making."

6. Book cost as measure.

In Public Service Commission v. Southwestern Bell Teleph. Co. Case No. 2121, Nov. 26, 1919, the Missouri Commission said: "As we understand it, the 'prorated book cost' given in evidence by the company for the various exchanges is simply the percentage relation of reproduction cost new which the original cost of all property bears to reproduction cost new of all property and in individual

instances the actual cost might vary greatly, either up or down. from what an appraisal would show. If the company, to eliminate competition, paid a price in excess of the value, or, because of discouraged local operation were enabled to purchase a plant far below its actual value, the 'prorated book cost' basis would not reflect anything like the original cost."

In Re Trenton & M. County Traction Corp. Dec. 26, 1919, the New Jersey Commission said: "That the company is entitled to have, for additions made to property in 1917 and 1918, the prices then prevailing, would appear to be reasonable, but that it is entitled to have these prices applied to all the property owned by it, without regard to the actual cost of the same, cannot be allowed."

In Re Arkansas Teleph. Co. Case Nos. 107, 108, 109, Feb. 23, 1920, the Arkansas Commission said that the consuming public should only be required to contribute an investment return upon the value of a utility based upon an average unit price, and not upon abnormally high current prices.

In Re Western Teleph. Exch. Co. Order F-706, May 21, 1920, the South Dakota Commission said: "This Board is of the opinion that if the cost of reproduction new is to have any proper relation to the fair value of the property for rate-making purposes, such reproduction cost should not be based upon the abnormallly high costs which now prevail nor upon abnormally low costs, both of labor and material, which are prevalent during periods of financial depression, but rather upon an average cost over a considerable period of time during which the prices of the different units have been reasonably stable or of a natural trend, as unit costs so determined are more likely to reflect normal and reasonable costs. The fair value rule contemplates the consideration of all proper elements and all the relevant facts and circumstances and the application to such a consideration of a reasonable judgment. A valuation so determined is perforce tentative and of no value except for the purposes of the particular case under consideration."

In Re Elizabethtown Gas Light Co. May 12, 1920, the New Jersey Commission said: "In the Board's opinion, the fair value new of the property of the company may best be ascertained by applying to the inventory of the property in existence on December 31, 1915, unit costs prevailing for a period of five or more years prior to December 31, 1915, and adding thereto the net additions on the basis of book costs, for the period from January 1, 1916, to the date of the valuation. In this way, the public will be protected against undue inflation and the company will receive the benefit of actual

increased burdens imposed upon it by conditions created by the World War."

In Re La Crosse & O. Street R. Co. R-2511, Oct. 31, 1919, the Wisconsin Commission said: "If a company were allowed a return on the reproduction value at every change in the market price of labor and materials, property, acquired during periods of high price levels, would have a small return in case of a return to normal prices, and while the reverse would be true, it would add a highly speculative feature to the management of railroads and utilities. It would also result in many changes of rates.

"The Commission has, in general, followed the principle of using a reproduction value as determined by price averages of a number of years as a basis for the return which a company should have, except where the evidence as to actual investment was clear and conclusive."

In Re City Light & Traction Co. Case No. 2040, Sept. 27, 1919, the Missouri Commission, in discussing the question whether in valuing the property of a utility, the utility should be allowed a valuation based upon the present day unit prices, said: "This question of the proper unit price to be utilized by regulatory bodies in reaching a present fair value of utility properties based upon the reproduction new less depreciation scheme is now looming up against the horizon surrounding rate-making authorities. The position. taken by this company and by many applicant utilities now before this Commission, is that we not only provide a rate that will absorb their greatly increased operating expenses, consisting principally of increased cost of labor, fuel, and material, but as well that the Commission allow them a return on an abnormally high value based on high current prices of the various units of their property, all of which are attributable practically in their entirety to abnormal economic conditions incident to the War.

"The former, after close scrutiny, and in many instances, material adjustments, the Commission has felt constrained to allow, but the latter the Commission has steadfastly refused to grant; the Commission holding to the view that the equities of the situation controlling are of such a nature that the consuming public should only be required to contribute an investment return upon the value of the utility bottomed upon an average unit price covering normal periods of from one to ten years antedating the present abnormal economic conditions covered by the great War, and, when available, current unit prices prevailing at date of construction. Supplementary to this, however, the Commission has uniformly permitted invoice prices of new construction, replacements, and betterments, when prudently made, during this abnormal price period.

"The Commission is without inclination in this case to accept present day unit prices upon applicant's property, believing the

proffered enhanced value thereof to be an unearned increment, and upon which the consumers should not be required to pay an investment return."

In Chippewa Falls v. Wisconsin M. Light & P. Co. U-1552, Nov. 8, 1919, the Wisconsin Commission, in fixing its fair compensation to be paid by a city for a water plant, said: "Some of the witnesses for the company have, in insisting upon giving a preponderating influence to present prevailing unit prices applied in arriving at reproduction cost, fallen into the error which so often exists in valuation cases of assuming that 'present value' when referred to public utility property has precisely the same meaning which 'exchange value' has when referred to products constantly traded in in the market and having an established and fluctuating market price. We do not think the two terms are necessarily synonymous in connection with public utility values. If the waterworks property can be said to have an exchange value or selling market price, that exchange or selling market price must necessarily depend largely upon the earning capacity of the utility sold, either present or prospective. Now it is an established fact that under present conditions, at a time when money employed in certain industrial lines has met with extraordinary reward and when interest rates are on an average at a somewhat higher level than they have been during the average past prewar years, and at a time when increased operating costs have adversely affected, at least to some extent, the confidence of the investing public in public utilities, the securities of many of the public utilities have a somewhat lower market price than they had in prewar times. Taking utilities as a whole, therefore, it may be said that exchange or market value for utilities as measured, if it can be measured, by the market for public utility securities, is actually lower in many cases than during the prewar period. To allow this fact in, and of, itself to determine the fair value of public utilities for any purpose would, in our judgment, be unfair to the utility. On the other hand, to be solely guided or controlled in fixing valuations by estimates of reproduction cost on present unit prices in no way related to original cost or investment, would be equally unfair to the public."

b. Of value for issuance of securities.

In Re Associated Terminals Co. Decision No. 6664, Application No. 4892, Sept. 15, 1919, the California Commission said: "While the Commission is willing to permit applicant to issue stock for the purpose of acquiring the equipment listed in the inventory, it is with a distinct understanding that the property not used or useful in the warehouse business will be excluded from a rate base if the Commission is ever called upon to fix applicant's warehouse rates.”

c. Of value for purposes of sale.

In Re Central Illinois Elec. Co. No. 8990, June 4, 1919, the Illinois Commission said: "The determination of value, for the purpose of purchase and sale, presents an entirely different problem than the fixing of value for rate-making purposes, and the principle involved is discussed at length in the matter of the application of the Stark County Power Company and the Public Service Company of Northern Illinois, relative to the purchase and sale of electrical property."

In Re Santa Barbara Gas & E. Co. Decision No. 6362, Application No. 4440, May 29, 1919, the California Railroad Commission authorized the sale, for the sum of $825,000 of gas properties with a physical valuation of $620,000, only with the understanding that the purchase price would not thereafter be urged as a measure of value for rate-making purposes.

II. Consideration of accrued depreciation.

In Public Service Commission v. Orchard Water Co. No. 4801, July 8, 1919, the Washington Commission said: "So far as we are aware no Commission had held to the theory that theoretical depreciation shall be deducted from capital, and an income calculated from the reduced amount."

In Bloomsburg v. Bloomsburg Water Co. Complaint Docket Nos. 2176, 2177, May 25, 1920, the Pennsylvania Commission said: "Depreciation may not be deductible from original cost figures but it is a fact which should be considered in arriving at fair value."

III. Overhead expenses.

In Re Ashland Electric Light Mill & P. Co. Application No. 4076, Dec. 24, 1919, the Nebraska Commission, in a security issues case made an allowance of 10 per cent for the cost of engineering and organization.

In Re Moscow Teleph. & Teleg. Co. Case F-278, Order No. 682, April 5, 1920, the Idaho Commission said that no allowance should be made for legal expenses beyond the amount actually expended for that item.

In Re Chicago Teleph. Co. Nos. 4406-4413, Feb. 9, 1920, the Indiana Commission in valuing the property of a telephone utility, made an allowance of 12 per cent of all items exclusive of materials and supplies for engineering, superintendence, etc.

IV. Items chargeable to capital.

In Re United R. & Electric Co. Case No. 1682, Dec. 31, 1919, the Maryland Commission said: "The Commission is not prepared