The silver state. [volume] (Winnemucca, Nev.) 1909-1925, 1922-12-12
LOWER RATE FOR
WATER IS DENIED
Public Service Commission Decides
That Water and Light Company
Has Not Made Excessive
Profits on City Water


by Commissioner Simmons, in the
matter of the city councils request
for lower water rates in the City
of Winnemucca, has been made
public and follows:
This proceeding arose upon
complaint of the City of Winnie
mucca, through its Mayor and City
Clerk; which said complaint is dated
June %, 1922, and recites in part
as follows:
"We respectfully request (. :.
that a new and far lower rate than
the one now established for the use
of water during the time that the
company is not pumping water :.
but that this reduction be made in
such a manner as to in no way re-
duce the percentage of net profit
to the company"
From the complaint itself it ap-
pears that the City is not desirous
of reducing the net revenue of the
company beyond the point where
it would be fair return to the
Water Company on its invested
capital beneficially used in the pub
lie service. From this point we may
proceed to determine whether the
defendant is making more than
fair net return on its present value
of plant.
Valuation
The valuation of the plant of the
defendant on Decamber 81, 1921,
is shown in the annual report to the
commission to be s103,37s.33. This
figure was accepted by both COM
plainant and defendant at the hear
ing as being a fair measure of the
value of the plant as of that date.
The defendant submitted another
figure of $130,989.98 purporting to
be the valuation as of September
80, 1922, but which figures was ad-
mitted to include $4,000 for the
development cost. Under the cir
cumstances, with no showing made
of actual deficits on which to predi-
cate this development cost, | am of
the opinion that it should be disal-
lowed at this time. There is un-
doubtedly "going concern" or ode
velopment cost" value in the plant
of the defendant; but, in the abb
sence of a specific showing, it is
deemed advisable to disallow this
item at this time. From the above,
| it may be fairly assumed that the
approximate present value of the
plant is $110,000.0o.
Earnings and Expense
Since 1916 the average annual
net return of the company exclud-
ing depreciation, has been approx
mately 5.5 per cent; and including
an allowance for depreciation, the
net return has been less than 3.5 per
cent. From the foregoing it is ap-
parent that the defendant has not
averaged a fair net return in past
years. Extending the earnings and
expenses for nine months of 1922
to a year period, the defendant
shows net earning of $7,456.34,
after allowing for depreciation Of
$1,797.70, which is the estimated
annual depreciation according to
the Commissions engineer. This is a
return of 6.78 per cent on the in
vestment of $4,000. Deprecia-
tion should be allowed for in esti-
mating a future net return, but in
the past, where the company has
not seen fit to show the disposition
of appropriations for depreciation,
it cannot be allowed in arriving at
the net earnings of the company.
A great deal was said regarding
the decline in the price of fuel oil
used by the electric department in
supplying power for the pumps of
the water department For 1921
the total cost of pumping and pur-
chased water use was $7,S56.39;
and extending the figures for nine
months of 1922, this same expense
amounts to $6,461.56; or a reduc-
tion from 1921 of $1,394S3. Rep
resentatives of the defendant stated
that power was sold to the water
department at cost, and that the
costs were adjusted to the rise or
fall in fuel oil prices. Thus the
water department has already se-
cured the benefit of the decline in
oil prices.
There was also some discussion of
labor costs. Representatives of the
defendant stated that there had
been no reduction in forces in 1922
and that there had been a slight in
crease in rates of pay.
Conclusion
No definite percentage rate of re-
turn has been fixed by the Commits
sion as being fair and reasonable
but from the above it is apparent
that the defendant has not averaged
a fair return for many years past
and will not earn in excess of 6
fair return in 1922. Under these
circumstances, I am of the opinion
that the rate schedules of the water
department of the Winnemucca Wa
ter & Light company should not b,