The Waterbury Democrat., 1937-12-01
Utilities or Country
 OherAid To Recovery
Adoption of President Roosevelfs "Prudent InvestI
 ment" Plan Seems to Meet With Favor

tor necessary for answer questions in the public mind to clear tho way for investments.
 Sell IVA Power
 The memorandum suggested that IVA power Do sold to operating utility systems, both publicly and privately owned, lat c price arrived ct under the cost accounting meth. ods prescribed for private utilities by the federal power commission. It suggested further that duplica. ton of transmission lines be avoid. cd by purchase tf possible.
 Rates at which such power should be sold, the memorandum said, should be filed under regulation of the federal power commission. Mu- nicipalitieS desiring to establish, public power distribution systems should Dc required to purchase ex- isting facilities which may Do owned in their areas by private operators at 70 price to be determined by q fair tribunal" Willkie said.
 HIS memorandum urged that the federal government decline to make any advances to aid such nunicl- palitieS in Acquiring their systems "to avoid stimulating the dsinte- gration of existing utility systems aS caused by the present federal poll. cy of making outright gifts to iiiuni. cipalities to duplicate existing diS- trihution llneS,"
 Define All Areas
 Further to clarity tho functlo and fields Of private operators and the IVA, tho memorandum sue. gested that areas of operations in rural lines and cooperatives be de. fined specifically and that questions ii dispute between utilities and ied- eEal agencies Do submitted to the federal power commission for Settlc. inent.
 'In the above suggestions" the memorandum said, "i have Bubor. dinAted by own views regarding the prudent investment method Of cval- uatlng utilities, which personally, 1 have never considered tho Soundest basis of valuation for the consumer. Likewise, there arc suggestions for corporate changes with reference tc writeups claimed by tho federal trade commission, the justice of many of which seriously dispute.
 Stimulate Recovery
 However. tho utilities could con- stituto such q great force for tho stimulation Of recovery, and their satisfactory relationship with the federal government is so iiidlSpens sable to their own well-being, that l mako the above suggestions in tho hope that they may constitute Solnc basis for an ainicabla adjustment Of tho present differonceS."
 Under the cost of reproductIon valuation theory--lipheld by Su. l,reme court decisions since ioD8-- the dominant factor in setting util. ItieB property valuations for rate- purposes is the concensus of of cost of reproducing the properties At current price levels.
 The judicial rule laid down by thC high court in i000 provides that TO. production cost eStimAteS must be weighed with historical costS--r. D., what actually has been spent on the properties.
 Historical Costs
 The prudent investment theory 1dvociAted by President Roosevelt k based primarily on historical costs, these costs, however, are carefully Scrutinised to sec if they have beei, made iii . prudent" manner. Thus, f an utility company pays Ai,2OO,. poo for c unit which actually hI worth only e2O0,000, it would Do ai. lowed only 92b0,000 in computing Inc rAtepbABe value.
 Private utilities generally have fought in behalf Of the reproduction .oSC theory, since ln most cases that has been tho highest figure. Excep- LloiiA to this rule are found in caseS of utilities corbtructed during tho lilgh.priCe-level boom days Of tho late ie20b, ih which ClASog historical ccsts are higher than reproduction cOBts.