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About Omaha daily bee. (Omaha [Neb.]) 187?-1922 | View Entire Issue (Sept. 19, 1916)
THE BEE: OMAHA, TUESDAY, SEPTEMBER 19, 1916. 'Jlmnna M4n NAikf fljlinrtnai. delphia. The Keystone concern it the largest in the business and has branch houses in all the principal cities of the country. Mr. Rowley started as an office boy in an Omaha printing office and later became a journeyman printer. While yet a young man he became foreman at the Rees Printing company, from which place he went as sales man ager for the George H. Lee company of this city. It was while with the Lee company that he becaaie ac ojainted with N. W. Ayer of Ihe Ayer Advertising agency. Mr. Ayer is also principal owner of the Key stone Type foundry. He called Mr. Rowley to Philadelphia and made him sales manager, later to be assistant manager, and now Mr. Rowley has risen to be general manager. These advancements have all come within five years and Mr. Rowley gives the city of Omaha due credit for all the business training that he received here. Sick ltrdch Dh to ronNttpatlon. On doaa Dr. Klni'i Nrw Life Pllla and your sick hadrhe U gone. Qet a l(-rnl buttle and b convinced. All drusglata. Advertisement. Commercial Club Would Revise Workhouse Law Some revision of the workhouse law in Nebraska is wanted by the mu nicipal affairs committee of the Com mercial club before a workhouse is established at Omaha. The committee met at noon with Commissioners Best and Jardine of the city and county, respectively, present to talk over the law. What the suggested amend ments will be is not yet determined, but there is a feeling that the law as it stands is hardly workable. nt V .,..,. T... r. ui rtcvotuiie iype ruunury Word comes to Omaha that Harry Rowlgy, formerly of this city, has hcen appointed general manager of the Keystone Type foundry of Penn sylvania, with headquarter! at Phila Report of Special Committee of Commercial Club of Omaha on Electric Light and Power Rates a Omaha, Nebraska. of the Ctty to the purposes mentioned September 18th, 1915. in the communication of said Commit. To the tee and under the conditions and un,w. nt-. rmmrit of the Citv.term f Mid communication. But of Omaha and to realizing the good purposes of aa.d Committee and the desirable objecs r. .,....- ii.m rf p..'to be attained by It " " BE IT FURTHER RESOLVED: er Company:- that it Is the sense and the wish of At the time of the last session of tnlg cduncll t0 torwara the elforta of the legislature, the matter of securing said Committee as much as is within wore favorable electric light rates for Its power to do and that the City the City of Omaha was brought to the Council and the various departments attention of the Commercial Club of of the City are more than ready, anx this citv. A general discussion of , "" " " same was carried on among the mem bers of the club, 'and the citizens of Omaha generally became deeply in terested in the subject . 1 . I. Ht,1, -In., Anrll 101K fin ordinance was paased by the" City ! Pa JUI 7 m&- i-i II !! v Itv. UtrKt . rtlMSO.e v,ouU re,.u.uB u.. Thomas J. Flynn, City Clerk. uuuhpouj iu iu ..... By H M primeau. Deputy. m fnrf nmunt nr rnta ordinance was ... .1 cil, and In response to the request said Committee In its work and to furnish It whatever of aid and means which may be in their power so to do. By W. S. Jardine, James C. Dahlman, Mayor and President of City Council. suspended by a temporary injunction ' in the Federal Court at the suit of tne Omaha Electric Light and Power Company. (This suit is still pending at the time of making this report) At this juncture, when tt seemed that several years of litigation would probably ensue before the controver sy should wend Its way through a series of courts until the highest court In the land should render a decision in the case that would be final, the Executive Committee of the Commer cial Club, after due consideration, de cided that, if Its good offices should be acceptable to the City Council and to the Electric Light Company, and that the benefits might be enjoyed by our people within a comparatively short period of time, In undertaking to ascertain the fwts as to tne amount of the Investment of the Omaha Electric Light and Power Comaany. the amount of its reyeno.es and expenses, the determination of 1 fair rate of return on its Invest ment, ana a siuay 01 rates 10 con sumers that would produce such rea sonable return, to the end that the controversy might with reasonable promptness be brought to a eon' elusion, it would offer its ser vices to the parties, and the chairman of the Executive Committee was in structed that if the offer was ac ceptable to the City Councit and to the Electric Light Company, he should appoint a committee to take charge of the investigation and to nake its findings in the premises. The President of the club, John L. McCague and the chairman of the Executive Committee, J. A. Sunder land, presented the matter verbally (o the City Council and to the Elec- iric Light Comrmy, resulting in fa vorable action by both of the parties. Thereupon, the chairman of the Executive Committee appointed the following committee to take the mat er in hand, viz.: ' ' F. A. Brosran, F. Js) Farrlngton. Geo. H. Kelly, F. S. Knapp, T. J. Mahoney, F. H. Myers, H. A. Thompson. J. L. McCaEue, W. S. Wright, The Executive Committee added to this committee the name of ' J. A. Sunderland. ' The Committee organized at a meeting held at the Commercial Club rooms on June 24th, 1915, by the elec tion, of J. A. Sunderland, chairman, and the designation of R H. Manley, Commissioner .of the Commercial Club, to act as Secretary. The Com mittee decided to ask the City Coun cil and the Electric Light Company to share in the expense of the investi gation. In response to this request, the City Council on July 27th, 1915, passed the following resolution: - - "Inasmuch an a Committee from te Commercial Club of this City has communicated with this Council its desire for the City to partlcinate in carrying halt of whatever costs may be Incurred in the necessary and pro per tnvest'gatlon' of the books and the of our Committee, the Omaha Elec tric Light and Power Company ac cepted the good offices of the Com mlttee in the following communica tion: . J. A. Sunderland, Chainntu. Special Committee on Electric Light and Power Rates, Commercial Club. My dear Mr. Sunderland: Responding to your verbal request of yesterday that I put in writing the Company's acceptance of the good of fices tendered by the Commercial Club through its President and your self I sumblt the following as my un derstanding of the plan and procedure by which will be determined, 1. The amount of money actually invested In the property of this. Com pany upon which it is entitled to earn a fair return. 2. The amount of profit to which we are entitled as a fair return upon the investment , 3. The rate wh!chwlll produce the fair return in question. Our proposition Is that your com mittee shall engage the services of an audit firm of the highest charac ter (whose report will be accepted without question by financiers at home and abroad) which company shall proceed as promptly as may be to make a complete audit of our books from the beginning of the Com- pany's existence down to the present time for the purpose of showing con clusively the total amount of invest ment upon which this Company Is en titled to a fair return. - While the se lection of the audit firm Is left entire ly to your committee this Company will pay for the audit and ail business incidental thereto. , . wnue tne audit is Being maae we would like to have the committee take up the question "What Is a fair return?" On this we would like to be heard. When the audit Is complete and the percentage of fair return has been agreed upon we would have the com mittee secure the service of a rate expert of the highest grade who shall report to the committee the form of a rate schedule which, will produce yie agreed-upon fair return upon our Investment This expert should not be one who is engaged In prfvat practice or has any affiliation which would prevent his being entirely ju dicial in his study and final op'nlon. We would prefer that be would be one of the experts of the Wisconsin Railroad Commission for the reason that the Wisconsin Commission is the only regulatory body in the country that has made a complete and scien tific study of the true basis of a rate schedule. The costs of this rate Investigation and all other costs In the case w.ll be paid by this company. Grateful to the Commercial Club and to yourself and your associates for the fine public spirit shown In this important matter and assuring you of complete co-operative willingness I am, with great respect. Sincerely yours, Geo. H. Harries, President" In the discussion between repre- froni the knowledge and considera tion of the Committee. As expert advisers, the Committee selected Mr. Blon J. Arnold of Chi cago, consulting engineer in private practice, who has served municipali ties and private Interests in some of the greatest engineering undertakings of our time, and Mr. Edward N. Strait, engineer in the statistical department of the Wisconsin Railway Commis sion. Mr. Strait has been connected with the Wisconsin Railway Commis sion during many years of Its active service, In which many of the rela tions between public service corpora tions and municipalities have been determined by it. The Wisconsin Railway Commission's decisions have been followed quite generally by courts and the commissions of other elates. The selection of- these ex perts was approved before their em ployment by the City Council and the Electric Light Company. These con sulting engineers spent several days in consultation with the Committee, considering the many phases and de tails of its work, and each of them has rendered to the Committee a vol uminous report made up independent ly, stating their conclusions and re commendations from the facts pre sented by the audit of Hasklns and Sells and such matters as the Com mittee presented to them. It has been the purpose of the Com mittee to secure from all available sources, Including the auditors, con sulting engineers, technical works and current publications, all the in formation possible bearing upon its work. The Committee has spent much time In its work. It has held several all-day sessions, many half- day sessions and many more shorter sessions of two or three hours each. It has held conference with the City Commissioners and the representa tives of the Electric Light Company, and one general hearing of all of the parties to which the public-was in vited. It has been the policy 6f the Committee not to hold conferences with either the City Commissioners or representatives of the Electric Light Company separately, believing that both of the parties should be present at any conference where the Interests of either of them were to be specially Inquired Into. ' From an examination of the Infor mation obtained by the committee as above set forth, the committee finds as follows: A. When the present Electric Light Company took over the plant and property, August 1st, 1903, the physical value of the plant at that time was, (H. & 8. p. 4).. $794,373.73 From that date until the 30th day of June, 1915, the company made ad ditions to the physical plant amount in. II D n n nt, 1 1 . .,' lug LV H. OL o, CJA. ,J... .,M.l,IH.l and also financed the company during The amount of this reserve which is it initial period, and has supervised found In the assets of the company as Its financing up to the present time. 1 of June 10, 1915, and which should We have been furnished with all be added to the foregoing items to the information in the possession of ascertain the total Investment, is the present company, ahd the ac- (E. N. 8. p. 136), $583,521.00. countants and engineers have made, .From the foregoing items we have from various angles, independent es- made up the total investment in the tlmates of the condition of the plant plant, business and working capital, and Its business during the initial as of June 30th, 1915, as follows: period, from 1119 to 1903. We are Physical value of plant satisfied that during a considerable j (X) k $3,194,680.58 portion of that period the revenues ' Working capital (B) 241,298.30 of the company were not sufficient to 1 Development Expense (C) , 750,000.00 Amount in depreciation reserve (D) 583,528.00 enable It to meet Its expenses, pro vide for the depreciation, and pay a reasonable return on the capital In vested. But by the year 1903 the business had reached a point where It was profitable. At that time there wits a Total 14,769,506.88 We conclude that this sum, last named, Is the amount of the com I rate of return on the Investment, and actment of the Butler ordinance, and we consider it here. prior to the new schedule of rates It is apparent that in a plant of adopted by the company on August this character depreciation would be 10th, 1916. We find the total revenue greater at the beginning of the de- derived by the company during the velopment. When the plant was year ending June 30th, 1915, under started In 1889 electric lighting was the schedule of rates then In force to in Its Infancy, and extraordinary ad- be: vances In the art have been made From sale of current ' since that time. These necessarily (S6.824.2C0 kilowatt involve the rejection of machinery' .hours) 11,372,01115 and equipment when a .more ad- Sale of Steam 81,784 44 vanced 'ype has been developed. As j the methods grow more stable, the 1 Total operating rev percentage of depreciation will be less. I enue $1,403,795 59 We have become satisfied, from the Income from securities calculation made by the experts, that J owned 36,640 00 during the period from 1903 to 1915 the actual depreciation of the plant I Total income $1,440,435 69 was substantially 6 per cent annually Thi8 exceeds the amount of a fair on the amount invesled in the plant, revenue, according to our estimate re-organisation to the extent that the pany's Investment which constitutes But we bBllevo that from now on the as shown above of $1,282,004 27 Total $5,236,121.00 And withdrew from the plant the completed depreciation during that period, amounting to (H. ft S. Ex. C) $1,329,462.86 So that, on the 30th day of June, 1915, the amount Invested in the phy sical plant was $3,906,658.14 On the estimated depreciation of 5 per cent per annum during the' pe riod from August 1st, 1903, to June 30th, 1915.. wejeduct from this plant inves'ment the sum of $711,977.50 (being the accrued depreciation re maining after the completed depre ciation shown above) Leaving invested in the physical plant after deducting accrued depre ciation, as of June 30th, 1915 $3,194,680.58 present Omaha Electric Light ft the investment In the plant business Power Company, a corporation organ- aBd property upon which It is enti tled under the laws of the state of tied to receive a fair return. Maine, received a formal transfer of j if we had accepted the estimate all the assets of the old company, and 0f Messrs. Hasklns ft Sells and had took over the management of Its added 13.718.210.91 as the develoo- buslness. Intent expense, to the other Items of From 1903 until the present time: the Investment, the total valuation the business has been profitable, and f0r rate making purposes at the pros during at least a part of that time ent time would be $7,737,71779 (H. nas produced an excess aoove a rea- 4 g. Special), sonable return on the capital Invest-1 The estimates of B. J. Arnold re ed, sufficient to reduce somewhat ,,,111 finding a total Investment the deficits incurred during the early , 0f $6,383,572.00 (B. J. A. p. 17), this period. . M Including a development expense of in endeavoring to arrive at me $1,682,112.00, (B. J. A. Add. p. 14.). amount of development expense it was Mr. Strait's conclusion, af- which should be allowed, we have ter comparing various calculations had the benefit of various calcuia-1 Which he made for us, that the tlons by the experts employed. amount of development expense to Messrs. .msxins sens, me ac-. be allowed was $1,234,993.00 (E. N. S. countants, submitted a report show- p. 63)i and th4 totai investment In ing that the amount of the accumu- the plont and business as of June latedS losses of the company, that Is, 30th, 1915,-. should be $5,400,000.00 tne amount by wnicn its revenues ( e N. 8. p. 72) fell below a fair return on Its invest-1 r the injunction suit brought by ment, from 1889 to 1915, would the Electric Light Company in the amount, at the end of that period, to United States Court to enjoin the 3,7is,zio.si. (H. B. special bb- Butler ordinance, we construe the fix- port.) ' The experts In the employ of Mr. B.. J. Arnold calculated the accumu- U.es there asserted by the company to mean that It claimed an Invest ment of $5,638,083.97, and It appears lated deficit at the end of the same from the figures obtained for us from period to amount to $1,683,112.00. , u, books by the accountants, that Its (B. J. A. p. 9) outstanding capitalisation, consisting Mr. Edward N. Strait of the Wis-'0( the following: consln Railway Commission, submit- B per cent bonds $a,n,,00000 ted a calculation based on different B per cent preferre( tock 424,20000 rates of income during the pertods in Common Itock 36 fl question of $1,234,993.00. At the re- quest of the committee be made I , , Tota, $5,938,600.00 computations ranging from $562,634 . . ....... (St. Table D 1, p. 136) based on an I , T?' Income of per cent from August '"'"" ,,,.., . 81, 1889, at the beginning of the bust- have fixed as above, is not unfair to ' ,J t. a.i. 101c ..ith company and Its etockholders, est on deficits compounded at 7 perlnd '""tes a necessary reduction cent per annum, up to $1,495,606.00 "m". " "n0 (St. Table 16. p. 62), based on a cal- ,rom those recommended by the ex. culatlon of 9 per cent revenue from ln to do, justice to the 1889 to 1903 and thereafter 8 per ." of the company. cent with deflclencv or excess of committee has made a revenue calculated in the same careful study of the question of the basis and compounded. I ra,e which ought to be al- The committee has seen fit to re- lowea 'or investments or this char ject entirely the calculations of Has- n"-' obvious that capital can kins & Sells on this item as being Bot be employed on terms fixed by based on data not accented by the lne municipality seeking tne services, committee, and has concluded that nor, by any rule of law. The employ ee recommendations of Mr. Arnold ment o( Private capital, like the pro and Mr. Strait were excessive, for the curement of any other' commodity, same reason. responds to the law of supply and After consideration of the entire demand. That rate of Income must matter we have concluded to recom- De allowed wlch will attract capital mend an additional allowance ' of to the Investment Otherwise the $750,000 to the Company's Invest- business could not be established In ment as development exoense. based , lne nrst instance, and a going busl- depreciation will be less, and, aver- by I i? 41 s aging the matter by periods, we think j. But on August u.x m5 thfl that while 5 per cent for the preced- company put Into effect a new sched- ing twelve years was a fair allow- uft of rateSi makng a ,ub.Untlal re. ance for depreciation, for any similar ductlon. We have had a detailed period, neginning in June, iio, an calculation made by the auditors as allowance of 4 per cent per annum t0 the income this pew schedule would be sufficient. woui, nlwe pr0(iueed durlng the pe. O. In determining what schedule ,1, ending June 30tn 1915 Md wt of rates a company should be al- nnd that for the same volume of cur lowed, In order to produce a given rrntl the gross revenue would have , net revenue to cover depredation on been $1 290 168 "3 the plant and a return to the stock- ThlsV howeVer,' 'is the net billing, holders. It Is necessary to ascertain ,nd WOuld not show the actual re the volume of the company's business ,llU8i a, lt cannot calculted what and the revenue derived therefrom It araount the company will actually al ls also necessary to ascertain the ex- ow in d,counts for prompt pay penses Incurred In the operation of ment, nnd how much lt will collect the business. n, peImUy for delay , payment8. We find , that for the year ending However, a comparison sufficient for June 30th, 1915, the company's ex- present purposes can be made be- penses were as follows: , n tween the net billing for current Manufacturing $268,246.70 nnder the 0ld rate, and the estimated r'.!"f.,l0B !'?!! 2 revenue on lhe '"N"" of net btlllDK J? ?,. .? ll'Yll f0P 018 Bam Period, under the new Utilisation 98989.05 rate. General expense 2C2.916.32 fader h M t. i in7,n . ', ,v, . ... . Under the new rate 1,290,16822 Total operating expense $C91.684.69 . . General taxes 98,088.63 City's share of gross re ceipts 32.403.15 Reduct'on .' .$ 89,222 45 K. In order to determine whether the rates now in effect are fair rates Total orating expense. I, lZ'pma ?f yMlD th9 and taxes 4824.176.47 ! . , , . have ascertained to , , , 1 , . he a fair return on the capital Invest- The foregoing amounts include ,H ,, ,. , every element which should be con- tMmM nymw the present sidered in determining, the gross rev- , for " enue which he company ought to r m5 wUh . " celve. except the annual charge for whlcD , tt .,7.,Z i,,lr "turn on the capital Invested, capital Invested. w. h.. ..k n,. But before using this expense ' ...... V .,, .' amount as a basis for rate making. , wce f n , we have had a careful study made of ,, , . tkl .1 ,,., ... , Its investment an amount sufficient the elements entering Into the ex- , ,h folIowl ,temg! itAnntt frtr thai nurnnaaa nr Hat arm in. Ing whether any adjustment should justed expens ..$ 744.176 47 be made. . .Depreciation charge (4 , In the first place, the expenses dur- on ln Ikil nsrlnl Injuria Incl.llallnn OOS.MJ IbMOI.Oj and renewal of Incandescent lamps. .Betuon c,pltal lBT,t Under the present rule of the com pany lamps are no longer supplied but are purchased and paid for by the customer. We find that this will re sult ln a saving In the annual ex- ed (8 per cent on $4. 769,606.88) 381,560.48 Total gross revenue... $1,282,004.27 To ascertain what portion of this pense, based on the volume of bitsl- (toss return should be received from ns for the year ending June 30th, the sale of current It Is necessary on the calculations made by Mr. Strait, this amount to cover all allow ances that might be made or claimed in such cases on account of . over head engineering and also what is usually denominated "going value." D. In addition to the physical plant property and the legitimate al- B. We find that during the six months ending June 30th, 1915, the lnwanre for rinvelnnina- the nm. and average working capital invested by the current working capital, the tne company in the operation of the company has an additional Invest business was, (H. ft S. Ex. C) . . . . ment ln the denreciatlon reserve, set sentatives of our Committee and the $ 241,298.30 aside out of the annual earnings, td City Councit, it developed that the c. The Committee has given care- meet the cost of replacing the plant, City Council did not feel free to bind fui consideration to the question of resulting from wear, obsolescence, itself in advance to adopt the report development expenses, consisting of or other causes. value of the property of the local Electric Light and Power Company, ln an endeavor amicable to a-iive at iair and equitab'e rates, to the vari ous class of consumers of s'd Com pany and to fpH Company frr current supplied by the Company, and, 1 Inasmuch as it seemed td be .ought proper and necessary by the r-nrnmllloa that nalrhai- thA Pftm"1T nor the City have further voice or d'- rectlon in such Investigation, to the end that whatever findings and deter minatlon the Committee might report, the same would have, at least, the greater appearance of fairness and impartiality, and, Inasmuch as lt Is the advice of the 'aw department. of the City that the City Is without lawful authority to c-xpend the public money for such pur poses without retaining definite control anil Hfrprtlnn over the Invefttlffattnn and work In hand as well as the m'ney to be expended, the manner, lie methods and the objects for vnich tt Is expended, and, WHEREAS, it may be feasible and "ossible for the Committee from the Vmmercial Club, working in con u:-ctlon with various officers and d" artmrnts of the City, assuming such ro-opr ration to be agreeable to the "o. nrttes, to reach a proper basis r fair and equitable rates, provtd-d he Electric Light and Power Cont rary will furnish certain desl-able an'i needed data and facts wltbou cost and expense to tie Committee. NOW THEREFrRE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF jhaka: V irk n , In Ihtt tvnmatanba iha uU Committee be advised that the City Council does not feel Itself free and and recommendation of the Commit tee, being without legal power so to do, but that lt would welcome the re sults of the Committee's investiga tions. While the Electric Light Company, in accordance with the original agree ment made by It, and acquiesced ln by the City Councit, has furnished all of the funds necessary to carry on the work of the Committee, the dis position of such funds has been wholly within the power of the Com mittee and no suggestions have been offered by or received from the Elec tric Light Company, as to the expen diture of any part of same. The Committee secured an analyti cal audit of the Electric Light Com pany's books and accounts covering the period from August 31, 1889 to June 30, 1915. Hasklns and Sells, the auditors selected by the Commit tee, have an unimpeachable standing throughout the United States and other countries. Their selection was formally approved by the City Coun cil and by the Electric Light Com pany. The auditors had access not only to the books and accounts of the Company, but also to Its minutes, accumulated deficits from early loss-1 We find that during the period es, during the period while the busl- from 1903 to 1915 the revenue of the ness was being built up. A some- company had been sufficient to set what simitar claim Is sometimes aside an annual sum to meet such made In investigations of this charac- depreciation,' amounting to 5 per cent ter, under the head of what Is called of the Investment In the plant from "going value." that is the val'te time to time (H. ft S. p. 4). The which a plant has after being many total amount Bet aside for -deprecla-years in successful operation, over tion during this twelve-year period Is the value which lt would have if but $2,041,440.42. Of this amount $1,329, recently constructed. In this case 462.86 was withdrawn from the ln also. It has been pointed out to us by vestment' as completed depreciation, the experts who have examined the as appears under paragraph (A) accounts of the company, that no sub- herein. And we have deducted the stantlal charge has been made for remaining amount from the invest overhead engineering management, ment ln the plant, so as to reduce it furnished ln the planning and con- to its 'present physical value. But structlng of the plant by the"engln- this does not mean that the amount eers of the parent company which of the depreciation reserve has been controls the stock of the company although such an allowance Is fre- ness could not obtain the needed capital to permit of its enlargement and development for a growing community. The entire capital necessary to fi nance such an enterprise and pro vide for Its enlargement and develop ment cannot be obtained upon the same rate of return as the Interest upon a well-secured bond. Such en terprises are usv-lly financed, partly by money provided by stockholders, and partly by an Issue of bonds con stituting a first lien upon the proper ty. From the examination we have given the question, we are satisfied that to obtain sufficient capital for the establishment and development of a business of thl character, It has been, up to the present time at least, necessary to flwre on a return on the total capital Invested at a rate which is fboitt 2 per cent or 2 per cent higher than the rate at wh'rh an Issue of first moffaee b-nds'enn be placed on the market This high er rate for the total capital Is of course to compensate for the risk In volved In the Investment, which Is thus made subject to a prior Hen, and liable to total loss If the enterprise Is not successful. It also appears that at the present time bonds on properties of this kind can be floated at a net rate of about 5H per cent, frequently made in such cases. In pur conclusions, however, we withdrawn from the Investment, un- allowing for commissions, discounts less lt has actually been paid out to and other expenses of the issue. the stockholders in dividends, or has been reinvested in the plant, and an have confined ourselves solely to con-' additional allowance made for it as sideling what additional allowance new Investment there. should be made on account of the de velopment expense Incurred by the company in building up Its business. lt appears that this franchise was obtained In 1885 bv one J. C. Regan, and his associates, and tha vouchers and all other records that a small amount of development work were necessary to make clear and in- had been done bv him and the pom- assets under the control of the man telllgtble all items entering into its pany which he organized to take over agement. Some of lt has either been An analysis of the accounts of the company and its assets has led to the conclusion that this reserve In the preceding amount which has ac tually accumulated out of the earn ings of the eompany, has not b en wholly kept Intact and preserved In accounting. From time to time the Committee called for special Informa tion, some of which required an enor mous amount of work. This work was done and the Information was' furnished promptly and to the entire satisfaction of the Committee. It Is our belief that nothing has been with held by the Electric Light Company the business, up to 1889, at which 1 paid out d'rectly or Indirectly In dlvl- time the stock of his company was dends, or has been reinvested in the purchased bv the Thompson-Houston plant and thfre treated as new capi Electrlc Light Company, and this tal. We do find, however, that the holding company, subsequently -con-1 company has assets on hand repre solldated with the General Elec- J sentlng a part of this accumulated re trlc Company, has ever since : serve, consisting of its own bonds, controlled the stock and dlrec-' purchased and held ln a sinking fund, led the management of the business, and the stocks of other companies. We find that, beginning with June 30th, 1915, and for a reasonable pe- 1915, of about (E. N. S. p. 82 3) $:o,ooooo. During the year ending June 30th, 1915, the legal expense of the com nany amounted to $75,531 02 (H. A S. Special). Without attempting to ana- Ivie ln detail all the Items entering into this exp-n'e. we find lt sufficient to say that while the revenue of the period endl-'g June 30th, 1915, under the rates then In force, was sufficient to meet these extraordinary expenses, "nd still leave a sufficient sum to pay a return on the capital Invested, and while no doubt these expenses were necessary on account of the Import ant litigation In which the company was engaged with the City of Omaha, Involving its right to do business and crntlnue to operate Its plant, and the other controversies growing out that dispute, yet . these expenses are not to be regarded as the normal basis for fixing rates. On the advice of the experts, Mr. Strait and Mr. Ar-' nold, we have co"clttded that there hould be a deduction made from tin expenses, on the basis of the business for the year en-M" June 30th, 1915, to deduct from it the . following Items: Income on securi ties owned ..,$36,640.00- Steam aold by company .... 81,784.4 Non operating revenue $,959.75 T5.S84.W . Revenue required . to be produced by sales of current $1,206,$20.08 We have seen that the rate now in effect. If applied to the period in question, would have produced a total return from current sold of $1,290,168.22 Deducting the foregoing , revenue required from I . sales of current 1,206,62008 Exce $ 83.548.14 We conclude, therefore, that In or der to produce a fair return on the actual investment, there should be a reduction from the rates put into effect on August 10th, 1916, sufficient td reduce the total revenues about of (E. N. S. p. 83) (D. J. A. Tnble 12 l80."1. or one-sixteenth of the whole d) $ro 000 00 gro" revenue from sales of current. As the actual expenses Incurred by I L- " musl H however, that the co"penv for the year ending j tne company cannot afford to do busl Tune 30th. 1915. including these extra, nt" on the bl we are now sug- orrt'nnry legal expenses and the in- "tatln8'- " iben " to be a contlnu stal'atlon and renewal of lamps ance of tne litigation over the right rmo'-nted to the sum of (H. ft 8. Suppl.) $324,176.47 Deducting: For lamp re newals $30,000.00 For extraordi nary expenses 50,000.00 $80,000.00 Leaves adjusted expenses for a similar period ....$744,176.47 H. Asaumlng, therefore, a volume lod following that date, until condi- of business equal to that of the year tlons shall have changed, as may be ending June 30th, 1915, the gross rev hereafter determined, a reasonable enue which the company ought to re rate of return to be allowed this com- celve from Its entire business should pany on the amount of Its Investment be sufficient to cover the following Is 8 per cent per annum on the In- Items: . vested capital, as round In paru- Au'usted expense $ 744.176.47 graph (D) herein, that Is to say, 8 Pnrelatlnn (4 per cent on $4,769,603.88. amounting pe- cent on $3,905,658,- to an annual return of $381,560.48. -14) 156,267.:: F. In dete-mlning what rates Re"rn on cs-sl inst- should be charged by this conpany, " " nr cent on $4,- It is necessary to ascertain what sum should be set apart as a deprecla- tion allowance. This is indeed a part of the current expense of the bust ness, the other items of which are to of the actual revenue obtained by the be hereafter considered. But the company during the year ending .tune amount to be allowed for deprecla- 30th, 1915, under the schedule of tion Is closely connected with the rates then ln force, prior to the en- 769,506.88) 381 5C0 48 ,1 Total gross Income fl 2S2.004.27 I. We have had an analysis made to carry on all classes of business in the City of Omaha, nor, If the com. pany Is to be compelled to meet the 1 competition of any other plant estab lished within the city of Omaha and seeking the same business. Our re commendation Is based on the sup position that both parties to the con troversy will accept the recommenda tion which we have made, and that all disputes which have existed up to date will be thereupon terminated, so that the company may be able to re duce Its expenses to the basis of the 1 adjusted expenses .upon which we have based our report. Respectfully submitted, : J. A. Sunderland, Chairman, Francis A Broken, F. J. Farrlngton, 1 Ceo. H. Kelly, F. S. Knapp, T. J. Mahoney, F. H. Myers, Henry A. Thompson, John L. McCague, W. S. Wright. Special Committee of the Commercial Club of Omaha on Electric Light and Power Rates.