The herald., 1921-04-07
1SSION IN TELEPHONE CASE

lila Il 4OAVA ~ ma
service in the State of Louisiana sl2,1ss,s476
The present value of the property, that 49, the cost
to reproduce the existing telephone system as
whole, shown to be something over sl7,2oO'-
100000.
We, therefore, used a figure far below the
reproduction cost Of the property. We have ike
wise used valuation figure which Is much less
than the present value Of the property, less ths
would be apportioned to the State of Louisiana,
inasmuch as the total reserve for deferred main
tenance for the entire system as Of date october
81, 1920, 1890 205.00, only portion OF whlcn
accrued within the state of Louisiana.
In addition we have allowed nothing for fran
chse value, going value, or other intangible as.
sets, which frequently have been recognized by the
courts property to be considered in establishing
fair values of public service properties.
In an endeavor to deal fairly with the public
and the telephone company we have therefore dis
counted in the fullest measure, the telephone COM
pany's figures, and accepted for rate making pur,
poses at this tme the orig nal cost OF the aetual
physical property used by the public of louisiana,
aisregardng its present value, or its reproduction
cost
There are three theories of value for rate
making: Q) the investment theory, which Is the
original cost plus subsequent expenditures (2) the
present value theory; 60 the cost OF reproduction
theory.
In adopting the investment theory, We have
secured the lowest possible fair value Of the prop
erty used and useful for the public, for it IS un-
disputed that properties built years ago could only
be reproduced today at greatly advanced cost.
The cost of reproduction, new, less accrued
depreciation, of the telephone system IN use ana
useful to the public in the State of Louisiana, would
produce much higher value than the actual average
investment value which we have used ana neceS-
sarilv higher rates than we have authorized
While no fixed rule has been laid down by the
courts to govern the decision Of what amount shall
depreciation of any particular property, we are
constrained to accept the rate OF 6oI per cent as
charged in this State as reasonable at the present
must be provided from year to year out Oh tne
annual earnings, and cannot be ignored Tor long
period and then capitalized. The annual allowance
for depreciation of telephone properties varies from
five per cent to ten per cent.
In our previous report and order we allowed
denreciation charge to operating expense Of $685.
62096 which is based the annual rate OF deprecl
alton ascertaned in 1920, of 6O1 per cent we nave
given this subject further careful ana
we find nothing in the record to cause US TO cnange
opinion.
In so finding, we do not fix an arbitrary rate
as the amount to be allowed for depreciation; anu
should future developments show the rates allowed
now to be too high, new and more lasting prop
critics are installed these figures will be subject 10
revision, and rates may be affected oy SUCH re'i-
sion
In again reviewing the evidence before US IN
greater detail, we do so in order tnat mere may
presented the consideration have given to each
point of Importance in the case and the conclusions
we reached on the record now before u.s.
All that we have said however, is without
prejudice to any future proceedings IN TINS OF othss
cases now before US, which may hereafter Do
filed.
our February &c, 1921, order, No. 2397, was
made after careful consideration, the basis OF
a voluminous record. 1t is our opinion that the
order should stand pending further processing
now contemplated. Should subsequent developments
cause us to revise our findings, this will be done
and if error is found we will require promp. re
fund by the telephone company TO an OIL us fonf
to be reasonable and just rates, cnange ia Ia.e
is necessary after we have heard the aaoitlona
evidence which protestants nave sought oppof'u''
to introduce.
The desirability of cooperation and the utInos
frankness between and from all parties is OBVIOUS
We exnect the case to proceed with mutual effor
on the part of all to bring before the Commlssl9o
all facts that will aid in determining the eomph
Gated issues.
Hinder the circumstances rected above we ar
of the opinion and conclude that these proceeo.ls
Should be re-opened for further hearing, our orde
- Eehr,arv o. 1921 to remain in full force an
effect pending such hearing, and decision Thereon
1t Is, therefore,
OFFERED. That these proceedings are hereb
80 ononed for a period of not exceeding four month
for the taking Of further testimony. 1t is furthe
ORDERED. That the Cumberland Telephone ar
r,anh Con,,nanv be- and 1t is hereby, directed al
rsauired to SO keep its records. books and accoun
that should our order No. 1897, Of date February
1901 he modified or cancelled, proper redunds ms
he nromptly made to all users OF telephone e
Change service, Of the difference between the rat
in effect on February 49, 1921 and such rates as ma
ba made effective after hearings and final decis'
herein. It is further,
OFFERED That our order No. 2897, Of Februa