X\M 
 
 
 Rates for G^s Service 
 Ey <-«L. Cory 
 
 --'> 
 
 -y 
 
 6 V 
 
 V 
 
 ^^J^ 
 
 U 
 
 \ 
 
 \- .
 
 i --/iii 
 
 .^■ 
 
 m- 
 
 
 ■V 
 
 "V^-^
 
 RATES FOR GAS 
 SERVICE 
 
 3yC. L CORY 
 
 
 "PAPER READ BEFORE "PACIFIC COAST GAS ASSO- 
 CIATION. OAKLAND, CALIF.. SEPT. 19. 20. 2 1 . f 91 1
 
 Reprint 
 
 JOURNAL OF ELECTRICITY, 
 'POWER AND CAS
 
 
 1^ 
 
 
 ^0 
 
 RATES FOR GAS SERVICE. 
 
 BY C. L. CORY. 
 
 In all probability more money has been expended 
 in the various States and cities of the Pacific Coast 
 during the past decade, either directly or indirectly, 
 ^ =^ in connection with litigation or other phases in deter- 
 
 mining the rates for gas service, than has been the 
 cost, in the same territory, of all experimental and 
 other related scientific and enQ;ineerin2: work of im- 
 proving the methods and reducing the cost of the 
 manufacture, distribution and sale of gas. Certainly, 
 there is no problem connected with the gas industries 
 more important than that of rates. There is a spend- 
 ing and receiving side to every organization. It is the 
 difiference between what is spent to provide a com- 
 modity and the amount for which the commodity in 
 the aggregate is sold which establishes the desira- 
 
 bility of the business. Unlimited commendation is due 
 the gas engineers of the Pacific Coast for the work 
 they have done in recent years to improve the pro- 
 cesses of gas manufacture, including all of the notable 
 advances in high pressure distribution and improve- 
 ment of service, as well as the increased economies 
 and reduced cost of production. It is but natural, 
 therefore, that we should be equally interested in 
 the consumption and use and especially the proper 
 rates to be charged for gas, not only from the stand- 
 point of the manufacturing companies, but quite as 
 much must the consumer's position in the matter 
 be given due consideration. 
 
 *The term "public utility" has been defined as 
 meaning and embracing each corporation, company, 
 firm, individual and association, such as express, 
 telephone, telegraph, sleeping car, freight-line, equip- 
 ment, electric light, gas, natural gas, pipe line, water- 
 works, messenger, signal, union depot, water trans- 
 
 *L,a\vs of Ohio, Langdon Act. 1910, Page 429. 
 
 L'28254
 
 Rates for Gas Service 
 
 portation, heating and cooling companies ; street, 
 steam, suburban and interurban railroad companies ; 
 also any plant or property owned or operated by 
 such companies, corporations, firms, individuals or 
 associations. 
 
 It is such companies as above indicated that pro- 
 vide service to the public, and the rates for such serv- 
 ice should be based primarily upon the cost of pro- 
 viding adequate and satisfactory service. To deter- 
 mine this cost is many times a difficult task, and espe- 
 cially So when the devices and system required to pro- 
 vide the service are not fully developed and standard- 
 ized. As an illustration, the rates for freight and pas- 
 senger service between San Francisco and Los An- 
 geles, whether by steamer or by rail, have been estab- 
 lished for such a length of time that it is not a diffi- 
 cult matter to decide upon the reasonableness of such 
 rates, and, therefore, rates may be established that are 
 more or less permanent and not subject to material 
 revision from year to year. However, to determine 
 adequate freight and passenger rates between these 
 cities using the automobile or the aeroplane would 
 be exceedingly difficult, if not impossible. However, 
 it is not to be concluded that in future years, service, 
 both passenger and freight, with the newest aerial 
 devices for transportation may not become so well 
 established, reliable and satisfactory that rates of 
 service might not be readily determined. 
 
 The business of manufacturing and supplying gas 
 hdS been very thoroughly standardized, although pro- 
 gress is constantly being made in the methods of man- 
 ufacture as well as the increased economies in distri- 
 bution. High pressure systems have been introduced 
 in recent years. The methods of gas manufacture from 
 California crude oil on the Pacific Coast have been per- 
 fected within a comparatively recent date. As com- 
 pared with many other public utility enterprises, how- 
 ever, the gas business has been established so long 
 that the determination of the cost of service is com- 
 paratively easy. 
 
 The cost of delivering gas to the consumer neces- 
 sarily embraces the determination among other things
 
 Rates for Gas Service 
 
 of a fair valuation of the plant that is devoted to 
 public use, the gross earnings under any given set of 
 rates and the reasonable operating expenses when 
 depreciation of the physical property and adequate re- 
 turns on the investment are included. 
 
 The general information necessary in order to 
 arrive at the proper rate for gas service may, in gen- 
 eral, be subdivided as follows: 
 
 1st. The valuation or appraisal of the plant used 
 for the manufacture and distribution of gas. 
 
 2d. The annual cost of operation, including a 
 complete segregation of all accounts set forth in such 
 a manner as to indicate the different operating costs 
 per 1000 cubic feet of gas manufactured and sold. 
 
 3d. A statement of the quantity of gas made and 
 sold for a number of years, preferably not less than 
 five, and the total revenues received each year from 
 the sale of gas. 
 
 Valuation. 
 
 There are a number of fundamental principles in- 
 volved in obtaining the valuation of a gas plant and 
 system to be used in determining a proper rate for 
 gas service. It is quite as important that corporations 
 themselves should determine for each year the valua- 
 tion of the system upon which a return on the invest- 
 ment is to be earned as it is for this valuation to be 
 determined by any public body, whether only inci- 
 dentally or directly concerned, with the fixing of rates. 
 
 The original cost of construction, the cost of re- 
 construction or reproduction new, the cost of repro- 
 duction new less depreciation, the present value, the 
 assets and liabilities taken as a whole, the capitaliza- 
 tion, the bonds and stock outstanding, and the gross 
 earnings and operating expenses are all elements that 
 should be considered in determining the valuation of 
 a public utility for rate fixing or other purposes. Each 
 of these elements constitutes evidence of wdiat is a 
 fair value. The original cost, the cost of reproduc- 
 tion new and the present value bear a very close re- 
 lation to the physical property of the plant and are, 
 therefore, most usually considered of the greatest im-
 
 Rates for Gas Service 
 
 portance in determining the proper valuation. Which 
 of these three elements gives the best indication of 
 the value will vary in each individual case. 
 
 The original cost can, if all records of construc- 
 tion are available, be usually determined by what 
 is known as the historical method. The conditions 
 under which the construction of the system was car- 
 ried out, whether all done at once or extended from 
 year to year as the growth of the business required, 
 will be covered in this method of determining the or- 
 iginal cost. When proper charges only are included 
 and no mistakes: have been made, for which the build- 
 ers may be properly held responsible, the original cost 
 represents the investment that has actually been made 
 in the physical property of the plant. 
 
 The rapid growth of many systems, however, and 
 the rapidity with which changes have been made, 
 coupled with inadequate records, make it many times 
 practically impossible to determine the original cost 
 with any degree of reliability. Much depends 
 upon the manner in which accounts and records have 
 been kept. In order to be of value they should show 
 the actual cost of the different parts of the plant, 
 segregating labor and material, the cost of engineer- 
 ing superintendence, management, and administration, 
 the amount that has been allowed as interest on the 
 capital during the construction period, the cost of 
 financing, which will include the discount at which 
 bonds were sold, the basis upon which stock has been 
 issued or sold, all promotion expenses and similar 
 items. It is not difficult to imagine records which 
 would give the above information, but I venture to 
 say that most rare is it that the original cost of a 
 gas plant operating at the present time may be ob- 
 tained entirely in such a complete and satisfactory 
 manner. 
 
 Moreover, the original cost even when determined 
 in full detail may not be the valuation upon which rea- 
 sonable returns should be allowed. It is a question 
 of equity between owners of the plant on one hand 
 and the customers on the other. The owners are en- 
 titled to a reasonable return upon what they have in-
 
 Rates for Gas Service 
 
 vested, while the customers should not pay rates for 
 service that will yield more than an adequate return 
 upon the investment necessary to supply such service. 
 If the plant has been built when prices were abnor- 
 mally high and money has been lost through lack of 
 reasonable skill, excessive promotion fees and dis- 
 counts, private understandings between the builders 
 of the plant and the contractors, the original cost may 
 be decidedly greater than the valuation on which the 
 investors should be allowed to earn. 
 
 Conversely, it may be that the plant was con- 
 structed when the prices for labor and material were 
 excessively low, or a great portion of the plant may 
 have been obtained through failure of previous owners 
 to successfully carry on the business, due either to 
 temporary financial difficulties or what has been more 
 common, great strides in the method of manufacture, 
 resulting ultimately in foreclosure. In such a case 
 the original cost would hardly be a fair figure upon 
 which to base the valuation for rate fixing purposes, 
 as the foresight and enterprise of the present owners 
 certainly justifies some regard. 
 
 The original cost is so rarely available that the 
 cost of reproduction new of the plant usually must be 
 determined. A great deal of engineering knowledge 
 and detail work is necessary to obtain this result. In- 
 variably, a complete inventory of the physical property 
 is the first step required. The only satisfactory in- 
 ventory is one obtained as a result of actual inspection 
 and enumeration, aided, as much as possible, by all 
 the records available, and supplemented by such addi- 
 tional information as may be had from the various 
 heads of departments and other employees of the com- 
 pany. Such an inventory should include for each dif- 
 ferent part of the property the amount of labor and 
 material required to provide ready for operation each 
 element of the completed plant. The next step con- 
 sists in obtaining from all data obtainable a suitable 
 price per unit, not only of each element of the prop- 
 erty, but the labor and material required to install 
 the devices in position ready for operation. It is well 
 in determining such unit prices to take a period cov-
 
 10 Rates for Gas Service 
 
 ering at least five years and obtain the average in this 
 manner. The total and average cost of the labor and 
 material that has entered into the plant ready for op- 
 eration is thus obtained. 
 
 Inventories. 
 
 Inventories of the actual physical property which 
 taken together go to make up a modern gas plant 
 and system should include the following: 
 
 Real estate. Furniture and fixtures. 
 
 Buildings. Automobiles, motorcycles, etc. 
 
 Gas works, including holders. Stable equipment. 
 
 Street mains. Tools. 
 
 Services. Supplies. 
 
 Meters, regulators and lamps. Working capital. 
 
 Real Estate. 
 
 A complete list of all real estate used wholly 
 or in part for the purpose of the manufacture and 
 the supplying of gas should be included in the inven- 
 tory. The values placed upon this real estate should 
 be determined in so far as possible by actual sales 
 of property in the vicinity of the real estate in ques- 
 tion when used for a similar purpose. The purpose 
 for which the property is used must always be taken 
 into consideration. Disinterested real estate men are 
 usually able to give information leading to a rational 
 decision in such matters. Unfortunately, assessments 
 for taxation purposes are not of material assistance 
 in appraising such real estate. On the other hand 
 the actual figures at which adjacent property is sold 
 are rarely available. 
 
 When a gas company has real estate not actually 
 in use but is holding it for future occupancy the ques- 
 tion naturally arises should such real estate be in- 
 cluded in arriving at the valuation of the plant for 
 the purpose of determining the proper rate for the sale 
 of gas at any given time. 
 
 In arriving at a conclusion in this matter, it is 
 best to proceed upon the principle that it is proper 
 to include all property actually required and used in 
 the carrying on of the business at the time in question 
 and not to include such real estLte not required or 
 used on the date the valuation is made. However, at 
 some later period when the real estate is actually put
 
 Rates for Gas Service il 
 
 to use and occupied by buildings and equipment, that 
 are a part of the operating system, in arriving at the 
 valuation, there should be added interest and taxes 
 during such time as the investment in such lands has 
 been tied up but not productive. On any other prin- 
 ciple, customers of today would pay a rate for serv- 
 ice in excess of what they should and customers of 
 the future may pay relatively less and thereby benefit 
 unduly. 
 
 Buildings. 
 
 All of the buildings owned by the compan}'^ as a 
 part of its operating system should be included in the 
 inventory and so segregated that it will be possible 
 to separate the structures such as office buildings, etc., 
 from the structures required as a part of the manu- 
 facturing plant. This should be done in order to 
 obtain the cost of the manufacture of gas as delivered 
 to the holders separate from the general expenses con- 
 nected with the operating of the property usually con- 
 nected with the expense of the general offices of the 
 company. The inventory costs of all buildings are 
 usually best obtained from the plans, specifications and 
 contracts or other records of the company. The con- 
 dition of the buildings in general usefulness and prob- 
 able future life should be taken into consideration in 
 determining the probable value based upon original 
 cost, cost of reproduction new and present value. 
 
 Gas Works. 
 
 The gas works inventory must include besides 
 buildings all of the equipment necessary in the manu- 
 facture, metering and storing of gas, such as boilers, 
 blowers, compressors, generators, exhausters, holders, 
 heaters, pumps, piping, purifiers, scrubbers, and mis- 
 cellaneous equipment. The date of purchase or con- 
 tract and the date when installation was commenced 
 and completed as well as the type of apparatus and 
 by whom manufactured, should be included as a part 
 of the inventory. When possible, the cost of each ele- 
 ment of the entire manufacturing plant ready for oper- 
 ation segregating labor and material is desirable.
 
 12 Rates for Gas Service 
 
 Street Mains. 
 
 An inventory of street mains is best obtained by 
 tabulating and mapping from work reports all installa- 
 tions and removals for as long a period as records are 
 available. Scaling street mams from maps in order 
 to obtain the aggregate length of the various sizes 
 should only be resorted to when the actual records 
 of installation are not available. The size of all street 
 mains including fittings and accessories of every char- 
 acter and classified as to the material used, such as 
 wrought iron, cast iron or casing, should be included 
 in the inventory. In a similar manner the cost of re- 
 placing the street surface in the various kinds of pav- 
 ing should be determined from the most recent records 
 available for such work. 
 
 The item of paving in determining the value of 
 underground street mains and services has been vari- 
 ously considered. Every legitimate expenditure in 
 adapting the utility to the progress and coiiimunity 
 growth, even if this involves the removal of the plant 
 from one locality of the city to a distant and more 
 remote location, is a proper charge to construction. 
 All expenditures for putting down pavement by the 
 company as required by the city or the cost of cutting 
 through such pavement for extensions and construc- 
 tion purposes, and its replacement, are unquestionably 
 proper capital charges. However, it is a question 
 whether a gas company may properly capitalize the 
 expense of municipal betterment which it has not borne 
 and when such benefits to the gas company are only 
 incidental and can only exist from the standpoint of 
 the cost of actually reproducing their underground 
 system, after the street has been paved, when as a 
 matter of fact the existing underground mains and 
 services were laid before the paving was actually put 
 down. The cost of such paving is not a proper ele- 
 ment of value when the cost of laying such pavement 
 has not been paid for by the gas company nor any 
 expense incurred therewith, providing of course that 
 all costs borne by the company of changmg the grade 
 or depth of underground mains and services, in order
 
 Rates for Gas Service 13 
 
 to adapt them to conditions required for paving by 
 the city, are included in the capital account. 
 
 Services. 
 
 In obtaining the inventory of services, it is most 
 satisfactory to list all services, obtaining thereby the 
 size, length, and character of each service as shown 
 by the records of this department. Only that portion 
 of the service belonging to the company should be 
 included and if consumers have paid for any portion 
 of the service that portion should be considered as be- 
 longing to the company. The total value of the ser- 
 vices should represent only those actually owned by 
 the company and in general should not include any 
 services or reproduction of any services within cus- 
 tomers' premises unless the cost of the same has ac- 
 tually been met by the company. 
 
 In order to arrive at a unit cost of services, it 
 is best to obtain the actual labor and material charge 
 for a number of services installed in various parts of 
 the district served and at different seasons of the year, 
 to get a reliable average cost per unit length of service. 
 
 Meters, Regulators, Etc. 
 
 The inventory of meters in service is usually 
 readily obtained from the company's records. The 
 inventory cost of the meters should include the nec- 
 essary testing, painting and all storeroom expense. 
 The cost of installing the meters should include all 
 costs from the time the order leaves the general 
 office until the order and record of installation are 
 returned to the general office. The time cards of 
 meter installers covering a considerable period can 
 with great advantage be used to determine the cost 
 of installing meters of different sizes. 
 
 Furniture and Fixtures, Automobiles and Motorcycles, 
 Stable Equipment, Tools and Supplies. 
 
 Complete inventories should be made of the 
 property owned and in actual use by the company for 
 the carrying on of the business covering all subsidiary 
 items such as furniture and fixtures, automobiles and 
 motorcycles, stable equipment, tools and supplies.
 
 14 Rates for Gas Service 
 
 Only those supplies should be included which are 
 active and of the normal quantity carried in stock and 
 necessary for the operation of the company's business. 
 
 Working Capital. 
 
 A gas plant and system in operation must have 
 working capital as well as fixed capital. Stores and 
 supplies which are included in the fixed capital do 
 not represent all of the working capital such plants 
 require. There must be available a reasonable cash 
 balance and other current allowances in order to oper- 
 ate economically and efifectively. Just what sum rep- 
 resents a fair amount for working capital is nearly 
 always a matter of judgment. From the amount of 
 working capital usually carried by such companies 
 and from the amount that is required by other similar 
 public utility corporations, it appears that as an av- 
 erage for the year a sum equalling the accounts re- 
 ceivable and cash on hand less the accounts payable 
 and consumers advance payments is a reasonable 
 allowance. The cash on hand, however, shoul'd be con- 
 sidered as that which is ordinarily required for the 
 operation of the plant and the conduct of the business, 
 including contingencies and emergencies, and should 
 not include the capital or ready cash necessary for the 
 construction of extensions or enlargement of the plant, 
 or balances resulting from the sale of bonds or stock 
 or in any case exceed the amount normally needed 
 and used by the company as an operating property. 
 
 Such an inventory coupled with what might be 
 called the inventory costs serves to obtain the de- 
 tailed and segregated costs of the various elements 
 going to make up the physical property of the plant. 
 In addition in order to estimate the total valuation it 
 is necessary to ascertain as nearly as may be the time 
 required for construction in order that interest upon 
 the investment during the construction period may be 
 estimated. The cost of engineering, supervision, fire 
 and casualty insurance, administration, legal expenses 
 and other factors must also be obtained, preferably 
 irom the actual working conditions during which re- 
 cent construction work was carried out.
 
 Rates for Gas Service 15 
 
 Taken together the cost of reproduction new of 
 the physical plant is usually considered to be the sum 
 of the elements above enumert^ted. The cost of repro- 
 duction new has been variously interpreted, sometimes 
 erroneously, especially when it has been held to mean 
 a ' ystem identical with the one the valuation of which 
 is under consideration. Properly, it should be under- 
 stood as a plant of similar character and equal effi- 
 ciency. The age of the system will have much to do 
 in indicating the fairness with which the cost of re- 
 production new is considered. 
 
 It will depend upon conditions as to whether the 
 cost of production new and the original cost very 
 materially. One of the principal dififerences which 
 will be found will be in the size and capacity and num- 
 ber of units in the two cases. Gas plants are probably 
 never built in a single year, nor used exactly as they 
 were originally constructed for a number of years. 
 The original cost will probably properly rover the 
 plants as installed with small units, while the cost 
 of reproduction new may be considered to cover only 
 the cost of a smaller number of much larger units 
 having the same aggregate capacity. Especially would 
 this difference arise in connection with the distribution 
 system, both mains and services. Originally one sin- 
 gle main on one side of the street of comparatively 
 small size may have been adequate to provide gas serv- 
 ice in that particular vicinity. Later on it became 
 necessary to lay an additional gas main many times 
 larger than the original and as is often the case this 
 later main is laid upon the opposite side of the street, 
 resulting in the cutting of all services leading to prop- 
 erty on the side of the street where the new main is 
 laid and the connection of those services into the new 
 main, instead of the old. As viewed from present re- 
 quirements, one gas main alone might be considered 
 in obtaining the cost of reproduction new, while the 
 actual cost would necessarily be greater. 
 
 Depreciation in Its Relation to Valuation. 
 
 While the original cost as well as the cost of re- 
 production new are ordinarily of the greatest import-
 
 16 Rates for Gas Service 
 
 ance in determining the proper valuation upon which 
 earnings should be based, there is what is often called 
 the present or existing value, or cost of reproduction- 
 new less depreciation, which must be given consid- 
 eration in determining the valuation in question. 
 Especially is this the case in plants the rates for gas 
 service from which have been ample to cover operating 
 expenses, including depreciation, and a fair amount 
 for interest and profits, but the amount collected for 
 depreciation has not been used as it should be and 
 set aside for replacing portions of the plant discarded 
 because of their becoming obsolete, inadequate or 
 worn out, but on the contrary has been distributed to 
 the stockholders in the shape of dividends. 
 
 Depreciation should be considered as the amount 
 that must be regularly set aside to cover all portions 
 of the plant that are discarded because of wear and 
 tear, inadequacy, obsolescence and general unavoid- 
 able decay. It is an operating expense and should be 
 borne by the customers through the rate paid by them 
 for the service rendered by the utility. But as it is 
 paid by the customers it must be set aside by the 
 company and used when needed for the renewal of 
 worn out and useless portions of the entire system, and 
 under no circumstances should the cost of such re- 
 newals be made an additional charge to the capital 
 or construction account except when the replac<fd 
 equipment is of greater capacity than that which is 
 taken out. Care must also be taken that the O'pfT- 
 ating charge properly known as depreciation shall not 
 be used for ordinary maintenance and repair. Actual 
 additions and extensions to plant which should be 
 •charged to the construction or capital account, replace- 
 ment of equipment set aside as a result of deprecia- 
 tion, and ordinary repair and maintenance costs, must 
 all three be most carefully separated and completely 
 segregated in the engineering records as well as the 
 financial accounts. 
 
 If construction, depreciation, repair and main- 
 tenance accounts are not so considered and deprecia- 
 tion is borne by the customers as a result of being 
 'included in the operating expense, and such deprecia-
 
 Rates for Gas Service 17 
 
 tion fund is not used to keep the plant in its proper 
 condition, but is paid in dividends to the stockholders, 
 it is practically equivalent to the payment of divi- 
 dends out of capital. Rates of service should be such 
 as to include a reasonable charge for depreciation, and 
 if the rates are such as to do this and the amount 
 necessary to cover depreciation is not used as it should 
 be, it cannot mean anything but that the money, either 
 in surplus or dividends is going to the stockholders 
 instead of being used for the purpose intended. 
 
 An allowance for depreciation obligates the com- 
 pany to use of this money in keeping the plant in 
 thorough operating condition, and if it is not so used 
 but is turned over to the stockholders, it simply means 
 that a part of their capital is being returned to them, 
 thereby reducing the investment in the plant. If this 
 is .the case, as a matter of fact the investment is so 
 reduced and there should be corresponding reduction 
 made in the actual investment presumably represented 
 by the original or cost of reproduction new. In such 
 instances, if the owners of the property, instead of 
 keeping up the plant as they should by the proper 
 use of the annual depreciation charge, have appropri- 
 ated for their own use the money contributed by their 
 customers, the annual depreciation should each year 
 be deducted from the valuation of the plant which 
 might otherwise be obtained. 
 
 Depreciation, like interest, continues constantly 
 and is always present. Every part of the physical 
 property of any system exclusive of the land begins 
 to depreciate when the plant is completed and ready 
 for operation ; therefore, the depreciation charge should 
 be constant. It of course may be that such deprecia- 
 tion covering a number of years may be arrived at as 
 an average for a long period, and it will not be neces- 
 sary to expend the average each j^ear. This is of minor 
 importance, however, providing the methods by which 
 the depreciation charges are obtained are sound and 
 reasonable. 
 
 Two methods are in common use for determining 
 depreciation. The first is known as the straight line 
 method, which involves determining the probable
 
 18 Rates for Gas Service 
 
 ultimate life of each element of the system, 
 consideration also being given to the value of the 
 discarded element as junk at the end of the period. 
 In the straight line method it is assumed that during 
 the entire life of each element of the plant the de- 
 preciation is uniform, which of course is not ordi- 
 narily the case as the rate of depreciation of a plant 
 as a whole is much more rapid during the latter part 
 of its life than during the first years of its use. Fair- 
 ness to customers, however, in the different years, as 
 well as safety to investors, indicates clearl}' the wis- 
 dom and correctness in considering the depreciation 
 uniform throughout the entire life of each portion of 
 the plant. 
 
 The second method of determining depreciation 
 is upon the assumption that each year an amount is 
 to be set aside and invested at compound interest 60 
 that this amount plus interest will be available to 
 cover the cost of the replacement needed at the end 
 of the period when the device or element is discarded, 
 and replacement necessary. The so-called rates of de- 
 preciation will naturally be less in the latter method 
 than in the former, since it is assumed that the de- 
 preciation fund will earn interest from the end of 
 the first year or even shorter period. If we consider 
 the life of some portions of a plant to be between 
 twenty and thirty years, with the latter method it is 
 necessary for us to in advance assume an interest rate 
 which will continue during this entire period and thi§ 
 is an assumption which, judged by the last twenty- 
 five year period, is hardly justifiable. 
 
 It may very properly be said that neither method 
 exactly corresponds to actual experience. At the 
 same time the rate of depreciation is something that 
 must be carefully estimated for each individual plant 
 and the data required compiled from the best informa- 
 tion obtainable from those who have been in charge 
 of construction and operation preferably for a number 
 of years. If new devices are constantly being per- 
 fected and introduced rates of depreciation will be 
 high due to the fact that older apparatus will become 
 obsolete and inadequate at an early date. On the
 
 Rates for Gas Service 19 
 
 other hand, if the different portions of the plant are 
 not subject to change as a result of improved or modi- 
 fied methods or distribution, rates of depreciation will 
 be low, providing, of course, that wear and tear and 
 ordinar}- deterioration are not severe with a reason- 
 able expenditure for ordinary replacement and main- 
 tenance. 
 
 Intangible Elements of Value. 
 
 In determining the proper valuation, therefore, 
 the original cost, cost of reproduction new, present 
 value as affected by depreciation should all be taken 
 into consideration. They are not the only elements, 
 however, although they are usually the most readily 
 determined; One element of value often suggested is 
 that of "good will." The good will of a business is an 
 asset that cannot be ignored in determining the valua- 
 ation of a property, provided the element of good will 
 is inherent in the business of a public service corpora- 
 tion which may have a practical monopoly. One of 
 the most comprehensive and generally accepted defini- 
 tions of good will is by Judge Story : 
 
 "Good will may properly enough be described to be the ad- 
 vantage or benefit which is acquired by an establishment, be- 
 yond the mere value of the capital stock, funds, or property 
 employed therein in consequence of the general public patron- 
 age and encouragement which it receives from constant or 
 habitual customers on account of its local position or common 
 celebrity or reputation for skill, affluence, punctuality, or from 
 other accidental circumstances or necessities, or even from 
 ancient partialities or prejudices." 
 
 Judge Hough must have had this definition of 
 good will in mind in the case of Consolidated Gas 
 Company vs. The City of New York, in which he says : 
 
 "There is nothing in the nature of the business enabling 
 it to acquire good will in the property sense or indeed in any 
 other. It is required by law to furnish gas to all demanding 
 it within a certain distance of the mains: and it owns the 
 mains, service pipes and meters. V^''hat induces a customer 
 to remain with this company, its successor or vendee? Nothing 
 that I can imagine, except a desire to avoid the nuisance of 
 street digging in front of his house; a digging, however, en- 
 tailing no expense upon him. Yet even this nuisance is in 
 all human probability impossible of occurrence because of the 
 beneflciallv monopolistic character of defendant's present occu- 
 pancv of the streets of this city * * *. Finally, this claim 
 of good will seems to forget that for many years the price 
 of distribution of complainant's gas has been regulated by 
 law. A citizen is entitled to have a clean street before his 
 house because he pays taxes, inter alls, for that purpose. He 
 is much more entitled to have complainant's gas in his house 
 because the company must give jt to him if he pays for it. I 
 think it apparent that the conceivable good will of a gas com- 
 pany in this city is about equal to that of the street cleaning 
 department of the municipal government."
 
 20 Rates for Gas Service 
 
 The public service corporation operating where 
 competition exists may have an element of good will 
 in its valuation, but it is certainly of little, if any, 
 consequence where the public under any circumstance^^ 
 must obtain its service, if at all, from a single corpor- 
 ation. 
 
 In a somewhat similar manner may the assumed 
 value of franchises be considered in determining the 
 valuation of the property of a public service corpora- 
 tion. Based upon court decisions, the principal ele- 
 ment in the value of a franchise "is the earning capacity 
 of the property of the corporation in connection with 
 which a franchise is necessary. Viewed from this 
 standpoint, since the earnings must be directly depend- 
 ent upon the rates charged for service, it is evident 
 that to include the value of a franchise as an element 
 in determining rates developes an almost impossible 
 situation. A franchise which is not exclusive can 
 have no real value from any standpoint and is in reality 
 little more than a permit to carry on the business and 
 to do necessary work upon public property. As an ele- 
 ment of value, even in the sale or transfer of the prop- 
 erty, it is questionable whether such a franchise would 
 be given serious consideration. If, however, a fran- 
 chise is exclusive and is owned by a company, it may 
 be considered of value and would be rightfully con- 
 sidered a part of the entire system if the business 
 were sold. On this assumption it is proper to con- 
 sider a franchise as a part of the taxable property 
 of the company. On the other hand, while there may 
 be some cases where the valuation of a property may 
 rightfully include a certain sum as the value of the 
 franchise, yet when this value must depend upon the 
 rates for which service is rendered, it is difficult to see 
 how it should be considered as a part of such valua- 
 tion. 
 
 There is an element of value that must be taken 
 into consideration in determining the valuation of 
 a property and which is sometimes referred to as 
 "Goins: Value." This is sometimes covered bv an 
 allowance usually in percentage to cover the differ-
 
 Rates for Gas Service 21 
 
 ence between the cost of the physical property and the 
 value of the completed system in operation providing 
 service to its customers and possessing numerous val- 
 uable contracts for giving service in the future. Going 
 value is of an intangible character and may be esti- 
 mated in some instances by estimating the cost of 
 developing the business which the company enjoys 
 at any particular time. The data naturally is rarely 
 obtainable to indicate the money actually spent by 
 the company to obtain its business, since in recent 
 years the period of time during which public service 
 corporations have been ready for operation and yet 
 not actually engaged in providing service, approxi- 
 mately at least up to their normal capacity, has usually 
 not exceeded one or two years. When the earnings 
 of a public service corporation have not been sufficient 
 to meet reasonable expenditures for the development of 
 its business and to cover operating expenses, depre- 
 ciation and a reasonable return on the investment, the 
 losses incurred in building up the business must be 
 considered as one of the elements to be included in 
 appraising a plant for the purpose of determining the 
 proper rates for service. 
 
 Probably the most concise statement in this con- 
 nection is from the decision of Justice Brewer in a 
 most noteworthy decision in the case of the National 
 Water Works Company vs. Kansas City in connec- 
 tion with the valuation of a waterworks which had 
 been taken by the municipality : 
 
 "The original cost of the construction cannot control, for 
 'original cost' and 'present value' are not equivalent terms. 
 Nor ■would the mere cost of reproducing the waterworks plant 
 be a fair cost, because that does not take into account the 
 value which flows from the established connections between 
 the pipes and the buildings of the city. It is obvious that 
 the mere cost of purchasing the land, constructing the build- 
 ings, putting in the machinery, and laying tiie pipes in the 
 streets — in other words, the cost of reproduction — does not 
 give the value of the property as it is to-day. A completed 
 system of waterworks, such as the company has, without a 
 single connection between the pipes in the streets and the 
 buildings of the city, would be a property of much less value 
 than that system connected, as it is, with so many build- 
 ings, and earning, in consequence thereof, the money which 
 it does earn. The fact that it is a system in operation, not 
 only with a capacity to supply the city, but actually supplying 
 many buildings in tlie city — not only with a capacity to earn, 
 but actually earning — makes it true that "the fair and equitable 
 value' is something in excess of the cost of reproduction." 
 
 In general it may be said that the courts have 
 with few exceptions held that going value is an im-
 
 22 Rates for Gas Service 
 
 portant and A^aluable consideration in determining a 
 fair valuation for the property of a public service cor- 
 poration devoted to public service. The difficulty, 
 however is in obtaining a fair and proper figure in any 
 given case. Competition may at any time seriously 
 affect any estimate which may be made of the prob- 
 able value of a going concern as contrasted with the 
 physical plant without customers or contracts. It 
 is probably most satisfactory to treat this matter pri- 
 marily from the standpoint of the excess value of the 
 completed system in operation over and above the 
 original cost, cost of reproduction new, or cost of 
 reproduction less depreciation, of the physical plant. 
 
 If this is done, however, such excess value of the 
 completed operating system must be considered en- 
 tirely separate from a percentage which may properly 
 be considered as approximately the contractor's profit 
 who undertakes to design, build and supervise the 
 complete construction of an entire system, turning it 
 over ready for operation to its owners. 
 
 The true value of a thing has been defined as the 
 price upon which a purchaser and a seller mutually 
 agree and at which figure an actual transaction takes 
 place. If an existing plant and system were to be 
 purchased and the owners were willing to sell at all, 
 they would surely take into consideration what it 
 would cost the purchaser to duplicate, not only the 
 physical plant, but obtain all of the business enjoyed 
 by them, and the prospective purchasers would surely 
 consider what it would cost them independently to 
 install a plant of equal general efficiency and use- 
 fulness, including the business developed and under 
 control of the prospective sellers. In the long run, 
 the true value must be the capitalization of an assured 
 income. A certain portion of this value is represented 
 by tangible property and the remainder, if there be 
 any, must be regarded as primarily traceable to the 
 earning power of the business. 
 
 Gross Revenue, Cost of Operation and Quantity of Gas 
 Manufactured and Sold. 
 Gas being a commodity, it is manufactured, dis- 
 tributed and sold to those who use it. As manufac-
 
 Rates for Gas Service 23 
 
 tured and sold it is divided into units which are usually 
 1000 cubic feet. The operating expenses may be 
 properly divided into manufacturing, including fuel, 
 distribution, general expenses, taxes and licenses and 
 depreciation. For any period the unit cost may in 
 a general way be obtained by dividing the total ex- 
 pense by the total quantity sold and the average cost 
 per 1000 cubic feet is thereby obtained. Similarly, 
 the unit cost for fuel and other station costs, for dis- 
 tribution, taxes and licenses, depreciation and general 
 expenses, may also be determined. It is of importance 
 also to know the relation between the total gas made 
 and delivered to the holders and the quantity actually 
 sold as per customers' meters. In this manner definite 
 data is obtained for the leakage and the reduction in 
 volume of the gas as measured by the station meters 
 and by customers' meters. 
 
 The operating expenses can be definitely divided 
 under two heads, fixed and variable. The fixed costs 
 should include all expenses that are independent of 
 the quantity of gas made but which remain practically 
 constant whether the plant is operated at or near its 
 full output, or at a fraction of this. Variable expenses 
 include those costs that vary with the output and 
 may be considered as of little consequence if gas is not 
 made. Naturally, these two classes of costs are de- 
 pendent and may vary widely. 
 
 It is not always possible to make a definite segre- 
 gation of these fixed and variable expenses, but when 
 necessary, approximate subdivisions may be made of 
 expenditures involving both. The cost of manufac- 
 ture per 1000 cubic feet depends largely upon the total 
 amount of gas made, decreasing as the volume of pro- 
 duction increases and increasing as the quantity made 
 decreases, and a slight reduction in the sales will 
 materially increase the cost of manufacture per 1000 
 cubic feet. The greater the sales the smaller is the 
 cost of manufacture, but not in the same proportion 
 for the total cost of service, when we include the dis- 
 tribution to customers' meters, and it is therefore of 
 the greatest importance in discussing the rates for 
 which gas may be sold to clearly distinguish between
 
 24 Rates for Gas Service 
 
 the cost of gas in the holder and when dehvered to the 
 customers' premises. 
 
 In general, it may be said that very large consum- 
 ers involve a smaller cost per 1000 cubic feet than 
 small consumers. The question naturally arises, 
 should this difference in the cost of service to various 
 classes of consumers be taken into consideration in 
 determining the proper rates for service? The same 
 rate for all is a term that is often much more beauti- 
 ful in the abstract than when absolutely applied. 
 Sometimes such a policy, when it means the same rate 
 for all regardless of both cost and the effect upon the 
 growth of the business, is a violation of sound busi- 
 ness principles and decidedly against public policy. 
 Often, uniform rates for a very large territory with 
 the same class of customers may fulfill all require- 
 ments, but it does not follow that the best interests 
 of all concerned are conserved where, in deciding upon 
 a rate, it is made uniform for every customer. Very 
 closely related to the fixed and variable expenses are 
 capacity and outpii" expenses, ard in some respects 
 they more clearly define the costs involved in the 
 two classes of expenditures. There is a term knovn 
 as "Consumer's charge" which may ordinarily be in- 
 cluded as a part of the fixed costs of operation, and 
 such expenses are directly proportional to the number 
 of consumers taking service. 
 
 These considerations usually lead to the estab- 
 lishment of what is known as minimum rates or a min- 
 imum bill, which should be high enough to cover the 
 cost to the company of the consumer independent of 
 the quantity of gas which may be delivered to and 
 used by him. Many times the actual consumption 
 of gas for small customers is not a great factor in 
 the cost of rendering service and from this stand- 
 point the establishment of minimum rates would seem 
 to be sound and thoroughly justifiable. 
 
 While no rates should be greater than the value 
 of the service rendered, it is not necessarily equitable 
 to charge the same r?tes to all regardless of the actual 
 cost, and, as the cost of manufacture per 1000 cubic 
 feet depends very largely upon the magnitude of the
 
 Rates for Gas Service 25 
 
 output, such a policy might not only tend to dis- 
 courage large consumption but to actually increase 
 the cost to small consumers. It may even happen that 
 large quantities of gas should be sold at even less 
 than enough to yield the regular rate of return rather 
 than these quantities should not be sold at all. 
 
 This phase of the situation is often entirely 
 neglected, not only by gas companies, but by those 
 responsible for the adjustment of rates on an equitable 
 basis. Failure to consider such opportunities often 
 results in losses of great magnitude and thereby re- 
 sults in increased cost to all consumers. A wise and 
 far-seeing management having all the information 
 available can usually treat such matters most effect- 
 ively by taking into consideration the location of such 
 large customers and the character and magnitude of 
 service required. 
 
 In this connection it is of interest to discuss 
 the advisability of charging a higher rate for gas when 
 used for lighting purposes than when used for heat- 
 ing and cooking. As a matter of fact by far the larg- 
 est part of the consumption of gas is for purposes other 
 than lighting, and this probably accounts for the fact 
 that the rates for the two classes of service differ. In 
 addition there is of course the fact that the use of gas 
 for lighting concentrates the maximum demand some- 
 what similar to, although of less magnitude than, the 
 use of electricity for lighting. Gas is stored in the 
 holder with little additional cost as compared with the 
 storage of electricity, so that the peake load character 
 of the demand is decidedly of smaller consequence, as 
 regards the maximum capacity of the plant, than in 
 the generation and consumption of electrical energy. 
 Whether use for lighting or fuel on the customers' 
 premises the gas is used in the same way and from 
 the same service pipes, and unless there is a very 
 great difference in the magnitude of consumption in 
 the two cases it is difficult to see where lies the 
 difference in the cost of service in the two instances. 
 
 Rate of Return on Investment. 
 What is an adequate return on the investment for 
 a public utility corporation is a question that has
 
 26 Rates for Gas Service 
 
 been given the greatest consideration, nqt only by the 
 courts of the country, but by Federal, State, Municipal 
 and other commissions. In the U. S. Supreme Court 
 decision in the Consolidated Gas Case of New York, 
 it is stated that : 
 
 "There is no particular rate of compensation which must in 
 all cases and in all parts of the country be regarded as suffi- 
 cient for capital invested in business enterprises. Such com- 
 pensation must depend gioatly upon circumstances and locality; 
 among other things the amount of risk in the business is a 
 most important factor as well as the locality where the business 
 is conducted and the rate expected, and usually realized there 
 upon investments of a somewhat similar nature with regard 
 to the risk attending them." 
 
 In considering such a matter it is evident that 
 under present industrial conditions the best interests 
 of societv as a whole are subserved when the share of 
 each factor of production is high enough to cause a 
 free and natural distribution of capital and business 
 ability as well as labor into all utilities. When wages 
 and the returns on investment are not high enough to 
 be attractive then in such a utility there must be a 
 decline. No utility will be furnished unless the factors 
 making such a utility attractive are present. Wages 
 must be high enough to attract competent workmen, 
 salaries sufficient to engage successful superintendents 
 and managers, interest on the capital legitimately in- 
 vested must be earned, and, in general, the return must 
 be high enough to induce investors to assume all risks 
 and responsibilities that are involved in their opera- 
 tion. From this it naturally follows that the rate fixed 
 for service rendered by public utility corporations 
 must in the long run be high enough to attract all of 
 the elements necessary for the production of that serv- 
 ice, taking into consideration the wages to be paid, the 
 cost of superintendence and management, the interest 
 on the investment and a reward for the risk and re- 
 sponsibility entailed. 
 
 Unfortunately, however, many who have been most 
 active in the development of public utility corporations 
 in recent years have been interested therein primarily 
 from the speculative standpoint rather than as legiti- 
 mate investors. Speculation necessarily involves risk. 
 An investment is generally considered reasonably safe. 
 A high rate of return rarely compensates when there 
 js a danger of losing a part or all of the principal. Cus-
 
 Rates for Gas Service 
 
 tomers of a public service corporation have a right 
 to demand that the rates they pay for service shall be 
 only adequate to give a proper return upon the neces- 
 sary investment required, and not so high as to make 
 the return, upon a reasonably safe investment, of the 
 magnitude usually demanded in a pure and unadul- 
 tered speculative venture. 
 
 The tendency toward legislation afTecting public 
 utilities, the creation of wise and powerful commis- 
 sions and the enactment of numerous laws not only 
 regulating but actually protecting public service cor- 
 porations constitute a definite reduction in the risks 
 and hazards formerly existing in many instances. 
 
 In public utilities capital cannot be turned over 
 as frequently as in commercial enterprises, due to (he 
 relatively large proportion of the fixed investment. 
 Legislative regulation of public utilities through com- 
 missions may in some respects be detrimental to finan- 
 cial operators who endeavor to evade their obligations 
 under the common law and who try to profit by the 
 manipulation of capital rather than through legitimate, 
 efifective and economical operation of their plants. 
 Such regulation, however, cannot possibly result in 
 permanent injury to the great majority of investors 
 and to the utilities themselves if honestly applied and 
 administered with ordinary care. An investment along 
 the lines of and in the spirit of such laws as those 
 which have been upheld by the courts assures, in every 
 case, a reasonable return on a fair valuation of the 
 plant. 
 
 While public utilities are subject to many condi- 
 tions that tend to increase the risks under which their 
 business is carried on, they are also afiforded a great 
 deal of protection that is of the greatest value to in- 
 vestors. Many are natural monopolies engaged in 
 furnishing service that has practically become a neces- 
 sity and for which, at least at the present time, there 
 are no effective substitutes. An investment in a public 
 utility corporation wisely directed, while involving a 
 greater risk than if the same money was placed in 
 good mortgages, should not involve hazards equal to 
 investments in ordinary competitive enterprises.
 
 28 Rates for Gas Service 
 
 The profits of a business consists of the balance 
 between the sum of expenses and the total income of 
 the business. It is the difference between the sum 
 representing the operating expenses, which includes 
 rent, salaries and wages, fuel, taxes, interest, depre- 
 ciation, and the total gross revenue. This difference 
 is the last share of the total income and unlike all the 
 other shares is not fixed. It simply consists of what is 
 left after all other claims have been completely satified. 
 Salaries, wages, rents and interest are usually fixed 
 at a certain amount per annum in advance and are 
 paid out of the gross receipts. The amount left after 
 these shares have been satisfied belongs to the owner 
 and represents his share of the profits of the busi- 
 ness. Interest and profits, notwithstanding the in- 
 determinate quality of the latter, are usually measured 
 upon the same basis and are included in what is gen- 
 erally known as the adequate return on the investment. 
 
 The difference between the gross revenue and the 
 aggregate of the legitimate operating expenses for a 
 single year is the sum usually considered as the net 
 revenue or return upon the investment. As the gross 
 revenue and the operating expenses are for many 
 reasons subject to wide variations, it is manifestly 
 unsafe to determine rates upon a single year's busi- 
 ness. A most valuable method is to consider the gross 
 and net return per dollar invested for a number of 
 years of operation. By doing this the additional in- 
 vestment in the plant from year to year as well as 
 the growth of the business, both from the standpoint 
 of gross revenue and operating expenses, is obtained. 
 In fact, many important conditions affecting the com- 
 pany are brought to light in such an analysis. 
 
 The value of ascertaining how much a dollar 
 earns, both gross and net, is due to the important 
 differences between public service corporation and or- 
 dinary commercial enterprises. In most priva :c un- 
 dertakings the operating expenses can usually be 
 greatly reduced or even practically eliminated if for any 
 reason the gross receipts are reduced so as to make 
 the business unprofitable. But this cannot be done 
 -in the case of public service corporations, who must
 
 Rates for Gas Service 29 
 
 under the law provide service to all within the terri- 
 tory covered by the distribution system provided who 
 request it. While the investment in the private enter- 
 prise may be greatly restricted or even withdrawn, 
 such is not the case with a public service corporation. 
 The relatively large investment in plant, equipment 
 and other property of the public service corporation 
 means that the interest and other fixed charges go on 
 at about the same rate whether the jdant is operated 
 and its output sold or not. As a result, the public 
 service corporation is compelled under certain ad- 
 verse conditions to keep its plant in operation even if 
 the actual operating expenses are greater than the 
 gross receipts. 
 
 A complete investigation of all conditions existing 
 for a number of years is therefore of much greater 
 value than confining the data upon which rates are 
 fixed lo a single year's business. The public service 
 corporation should not be a free agent to do abso- 
 lutely as it pleases, and on account of this restriction 
 certain reasonable protection is desirable for all con- 
 cerned. Free and Unrestricted competition between 
 private enterprises may be of the greatest benefit to 
 the public. Experience shows, however, that this is 
 not the case with public service corporations where the 
 commodity furnished b}^ them is a necessity and the 
 character of the business such as to be a natural mo- 
 nopoly. Competition in such cases inevitably results 
 in a bitter struggle for supremacy and rates so low 
 as to be inadequate to maintain the proper quality of 
 service and vield a return sufficient to make exten- 
 sions commensurate with the growth of the com- 
 munity. Two or more distinct and separate corpora- 
 tions providing the same public commodity are not 
 likely to remain separate very long. Sooner or later it 
 will be self-evident that the service rendered by them 
 independently can be more cheaply, effectively and 
 in a better manner provided by a single operating 
 system under one management. As a result it is an 
 invariable rule that competition which is often thought 
 to be preventive of excessive rates becomes idtimately 
 the direct cause of what is relatively extortioi\ate rates 
 
 228254
 
 30 Rates for Gas Service 
 
 of service, when compared with what the rates should 
 be if destructive and temporary competition is pre- 
 vented and the rates equitably fixed under proper con- 
 trol by a wise commission. 
 
 Again, a modification of rates at frequent intervals 
 is undesirable, as it renders unstable and therefore the 
 more hazardous the entire business of rendering serv- 
 ice. Everything of every character tending to elimi- 
 nate uncertainties and general risks on the one hand, 
 and which provides protection and wise regulation on 
 the other, definitely increases the security of the in- 
 vestment, the required return upon which is thereby 
 reduced, the general stability of the enterprise is ma- 
 terially improved, resulting not only in reduced rates 
 but improved quality of service. ' 
 
 Conversely, the rate of return on the investment 
 and consequently the rates of service must be corres- 
 pondingly high as long as unrestricted competition 
 threatens, and extraordinary risks involving a possible 
 loss of a large fraction of the investment confronts, 
 those interested in the progress and development of 
 public service corporations in general. 
 
 In the end, all costs of every character, such as 
 litigation and other expenses, incident to the estab- 
 lishing of rates, whether paid out of public funds or by 
 the public service corporations, come out of the cus- 
 tomers' pockets, as taxpayers in one instance and as 
 consumers forced to pay the company for service in 
 the other. The constant danger to the company of 
 having its investment as well as its gross revenue seri- 
 ously impaired due to the fixing of rates upon other 
 than a sound and equitable basis involves that much 
 extra hazard in conducting its business, necessarily 
 requires an increased return upon the investment on 
 account of such menace, and in turn will ultimately 
 result in rates higher than they should be.
 
 UNIVERSITY OF CALIFORNIA AT LOS ANGELES 
 THE UNIVERSITY LIBRARY 
 
 This book is DUE on the last date stamped below 
 
 Form L-9-15m-3,'34 
 
 UNIVERSITY of CALIFORI 
 A i 
 LOS ANGKLES 
 LIBRARY
 
 EG 
 4029 Cory - 
 
 Ut bUUTHERN REGIONAL LIBRARY FACILITY 
 
 AA 000 578 375 8 
 
 -"J 
 
 .?^r^: 
 
 1* 
 
 ■c< ,^- 
 
 
 >--•■■.;, '■*■'■■ 
 
 iAiMti^»i'Aim
 
 
 vr 
 
 ■^^S| 
 
 :^3 
 
 :'^f:i 
 
 ,J'^' 
 
 ■,yjK>-' 
 
 jfc%.,. . 
 
 ^ijg^^ 
 
 U: 
 
 Wi 
 
 
 ^■:J 
 
 
 ':V 
 
 i ":. 
 
 
 I 
 
 %.. 
 
 '^:%—-4'^-r 
 
 
 
 
 K:^-'^' 
 
 
 3%k 
 
 -t^^ -> ----^ 
 
 
 ./ ^ 
 
 fi>v 
 
 ; a1& 
 
 .7 
 
 •A;'-^, 
 
 
 
 P- 
 
 . -- « ■•• .' 
 
 W'^ 
 
 •M' 
 
 'r 
 
 -,'■ ^--::^- 
 
 ,^>»_,...,. v^--: