Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1915-08-18
PUBLIC UTILITIES
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dred to three hundred dollars. This
constitutes its entire tangible prop
erty. 1t estimates the cost of building
concrete reservoir and dam at one
thousand dollars and the cost of ne
cessary pipe lines at five thousand
dollars. 1t will be a gravity system.
Engineers Investigation.
The Commissions engineer has
made a careful study of the situation
on the ground. and reports that the
reservoir contemplated would hold
about $500 cubic feet of water, fed
by a small brook which collects the
natural run-off from Walnut Hill.
which is covered with trees and vege-
tation and should be free from con-
tamination. He estimates the flow at
from one to three gallons per second
depending on the rainfall, and the
time required to fill the reservoir at
pa gallons per second at about forty.
eight hours.
The engineer estimates the cost of con-
structing the plant sufficient for all OF
the purposes indicated by the petitioner
and including the price paid by it for the
reservoir site at $4,000, which does not
differ materially from petitioners esti-
mate. His investigation and report sub
stantially corroborate the petitioners
representations to the Commission as to
market for its product and probable reve-
nue. therefrom.
A Novel Question Arises.
1t remains. therefore. only for the
Commission to determine the amount OF
bonds which should be authorized ana
the conditions under which they may be
issued. While the amount involved in
this matter is small, the case presents a
novel question, which is likely to recur1
and or which the policy Of the Commits
sion may as well now be made clear
The company's balance saeat is as fol-
lows:
ASSETS.
Franchise Chap Sc, Laws OF 1902, $4,000
Real Estate, free of membranes, 5cUej
c pe and elbows, 10000
LIABILITIES.
Capital stock, outstanding, $1,000!
S,,rnlus 5000
$4,000
The facts already stated show that
there has been withdrawn from the cor
poration all of the cash that ever was
paid in as capital; that the corporation
parted with all of its tangible assets ex-
cept real estate which cost 500 and pipe.
etc, whose value is not claimed%to 4ex-
coed $500, and that it ceased tosdo bust
ness. Practically. it is a new corporation
seeking authority to secure its entire
capital, and must be treated as such.
The Commissions Opinion.
This being true, we believe that the
policy adopted by this Commission In the
matter of the Black Stream Electric Co..
U No. 25, P. U. R. 1915 C. s61. should
govern. While the original certificates of
stock are still outstanding, the value
which they represented has been with
drawn dollar by dollar by their former
owners. Except for 500 at most. they
now represent no tangible assets. Tn
less they are vitalzed by new money
substantially the entire undertaking will
be financed from bonds. II is we'll set
tied that franchise value cannot be con-
sidered as an element in rate making,
and this bookkeeping asset would there
fore be valueless any time the question
of rates might be raised. The Commits
sion could not permit the petitioner to
construct a plant on 5000 of bonds and
of capitalization. So far as the book
49,.
corporation paid 500 for it. 1t may have
been. and probably was. an excellent
trade-might have been at $500. But the
accounting rules Of this Commission re-
quire purchased property to be carried
at cost, and, although it was purchased
before the Public Utilities Act became
operative. considering this in effect as
equivalent TO capitalizing a new enter
prise, we do not think that we ought to
deviate from the rule.
We then have in effect a new corpora
ton with assets captalizable at $500. All
outstanding stock above that represents
nothing that can now be considered, or
that would give it earning value in the
hands of possible future purchasers.
This construction is no hardship upon
its present owners, because it cost them
nothing. Before additional securities are
issued all in excess of 500 should be
turned into the treasury or made good
by the advancement to the corporation
of an equivalent amount of cash. Bonds
should not be authorized without a SUBJ
stantial capital stock margin.
The Advice Given.
If. therefore, the present stockholders
will reduce the amount Of capital stock
outstanding to not less than 5000 par
value and pay into the treasury Of the
corporation cash for all stock remaining
outstanding in excess of $780, at par, the
Commission will grant an order authoriz-
ing the issue OF five per cent, mortgage
bonds suncient to secure a combined
capital OF $6occ, when said bonds are sold