The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1914-01-21
Validating the Water Works

Validating the Water Works
The fixing of rates to be charged by public
utilities corporations for their commodity was
placed by the Shivey- Spencer law in the hands
of the Indiana State Public Utilities Commission.
It is thew who decide what the water-works COM
panv shall charge for water and not the company
itself.
The law permits each public utilities corpora
ton to receive reasonable return of interest on
its service, and bases its calculation of the rate
designed to yield this amount of profit on a val
uation of the plant. 1t must be noted that the
basis of rates is not original capitalization as is
sometimes supposed, but it's present valuation
Thus if plant cost 100000 originally, but is
now worth $4,000 it is manifest that the prof
it must be based on the latter figure.
Before the Public Utilities Commission can
determine a reasonable charge water in Rich
mond, it must have accurate present valua-
ton of the plant. 1t is this which is now in
question before the Commission and which is the
basis of a suit that will be tried by them in the
future.
In 1904 the Board of Public Works had an ex-
pert engineer, Mr.. Maury, make a survey of the
plant; but the Board specified that the en-
gineer should estimate the cost of duplicating the
equipment rather than it's then value. For this
used.
The Richmond City Water Works Company
has itself had valuation made by certain ex-
perts called in from outside. They have est-
mated the value of each and every item owned by
the company. These estimates they have en-
bodied in report that now lies in the hands of
the Commission and also the citys legal de-
partment.
The cty's legal department does not question
the accuracy of these estimates made by the con-
sulting specialists, but feels there are many in
Guided in the company's report which should
not be incuded; it also feels that in some
the report does not make sufficient de-
duction for depreciation. For these and few
ether reasons it desires to have overhaung
of the report made by an expert who understands
thoroughly the difficult work of hydraulic engi-
neering.
Inasmuch the legal department itself, how
proficient it may be in it's use of the law, is
in the nature Of the case not competent to pass
matters outside its province there seems nc
other alternative than to call in an expert from
the outside.
1t is this which the city council decided on al
it's session Monday night and for which it appro
priated $500. They plan to specialist
who highly recommended and who viii
make survey valuation of the plant but viii
give his judgment regarding the moot points ii
the report. Further than this the city plans t
make Of him as an expert witness when the
pending trial is held before the Commission
The Importance of this will be Immediately
recognized when recalls that the rates which
the Richmond consumers of water will pay are
determined on the basis of valuation. If, in in
stance, the Commission gives them the right t.
so charge as to return per cent on the presen
value it means that for every 100000 excess
valuation the city must unfairly pay out eacl
year an addition of $4,000 in rates. In view O
these possible savings to the citizens it seems lik
business economy to pay $500.
This is not to insinuate, however, that tn
Water Works Company is endeavorng to graf
en- the people of the city, but is merely a business
like and fair method of dealing with the matter
The company called in it's experts to guar
against the city placing too low valuation OF
the plant; the city has equal right to guar
against the company placing too high valuation
on it. There is possibility of error boil
sides and it is just and fair that both sides tax
equal precauton against error