$4,500.00 of its first mortgage 5 per cent bonds to Mr. Arthur Gregory for 4,500 shares of stock held by him. It was stated that Mr. Gregory had originally elected to convert his stock into bonds under the plan of October, 1907, but that his bonds had never been delivered to him. Request was made to complete this transaction. The Commission informed the applicant that it would consider this feature of the application when proper evidence was submitted that Mr. Gregory had in good faith taken the necessary steps to make such conversion at the time of the original offer in 1907, and further that no other stock had any right to claim the conversion privilege. This information has not been presented to the Commission, and as applicant makes no reference to this matter in its amended application, I assume that it desires this feature of its petition left in abeyance for the present. Nothing herein said should be construed as prejudicing the right of the applicant to reapply for authority to issue the $4,500.00 of bonds to Mr. Gregory. I shall not at this time recommend that the application of Southwestern Home Telephone Company be either granted or denied. I recommend that it be held in suspense pending such action as the applicant herein may take following suggestions which I shall here outline. I will submit suggestions for the company to follow rather than an order, feeling that the applicant herein will take the view that the suggestions are meant in its own interests as well as in the public interest. If an order along these lines becomes necessary, however, it may be issued at any time the Commission may believe it desirable. I, therefore, recommend that the application herein be held in abey ance until July 1, 1914, and that the applicant herein by that time present to this Commission for its approval a general plan which shall embrace the following: 1. Reduction of applicant's bonded indebtedness by the conversion of a portion of this indebtedness into stock, or by some method equally satisfactory. 2. Reduction of applicant's floating indebtedness by the amount paid out in dividends during the past three or four years, and by such other means as shall serve to reduce this indebtedness to a conservative basis. 3. Cancellation, if possible, of stock now held by the trustee under applicant's bond issue. 4. Restoration to applicant's treasury and cancellation of block of 300,000 shares of "contract" stock through an arrangement to be effected between the company and Mr. Charles A. Rolfe and Mr. J. J. Prendergast. I properly leave the details of these plans to be worked out by the applicant. I suggest, further, that the applicant notify this Com mission formally by letter on the twenty-fifth day of each month outlining what has been done up to that time toward meeting the suggestions of the Commission herein outlined. The foregoing opinion is hereby approved and ordered filed as the opinion of the Railroad Commission of the State of California. Dated at San Francisco, California, this 24th day of February, 1914. DECISION No. 1297. IN THE MATTER OF THE APPLICATION OF C. EDGAR SMITH, A WATER UTILITY, FOR PERMISSION TO INCREASE THE RATES CHARGED BY HIM FOR WATER FURNISHED TO CUSTOMERS IN SUNNYSIDE HEIGHTS AND ORIGINAL SUNNYSIDE, LOS ANGELES COUNTY, CALIFORNIA. Application No. 650. Decided February 24, 1914. Applicant petitions the Commission for permission to increase the present rates charged for water so as to permit of an adequate return sufficient to cover operating expenses. Held, That the present rates of applicant are unjust. A rate of 25 cents per 100 for less than 600 cubic feet and of 20 cents for each additional 100 cubic feet in excess of 600 with a minimum monthly rate of $1.50 fixed as a just and reasonable rate. Frank A. Crowe, for Applicant. L. B. MacNitt, for consumers of water. REPORT OF THE COMMISSION. THELEN, Commissioner. This is an application by C. Edgar Smith, owning and operating a public utility water plant serving Sunnyside Heights and Original Sunnyside in Los Angeles County, California, for authority to increase. the rates charged for water. The present rate is $1.50 per one thousand cubic feet or practically 7,480 gallons, and 15 cents per additional 100 cubic feet with a monthly minimum of $1.50. The petition in this case alleges that C. Edgar Smith is the owner and operator of the water system supplying water to Sunnyside Heights and Original Sunnyside, that his water system has been operated at an annual loss of $2,200.00, not including interest or the reasonable salary of the superintendent, and the petitioner accordingly asks authority to increase his rates so as to cover the expenses of running his plant. 17-10192 The evidence shows that C. Edgar Smith originally owned two tracts of land known as Original Sunnyside and Sunnyside Heights, together containing some 150 acres. Mr. Smith subdivided Original Sunnyside Tract into 238 lots and Sunnyside Tract into 70 lots and has now sold all of these lots except about 20. There was no water on this property. In order to sell these lots, Mr. Smith dug a well on a half acre lot in the Original Sunnyside Tract, installed a pumping plant, built two tanks, one for each tract, and installed a pipe line system for the conveyance of water to lots in these two tracts. The contract of sale and the deed from Mr. Smith in each case contained a provision reading in part as follows: "And the said parties of the second part (purchasers), their heirs and assigns, of the above described land shall at all times be entitled to secure water from the pumping plant and well on said tract, at the actual cost of operation and maintenance of said plant.” It is evident that it was not intended that the rate for water should include interest on the investment or depreciation on the plant. It was presumed that the increased sale price of the lots would reimburse Mr. Smith for his investment and would take care of depreciation. The parties accordingly agreed that the water rate should cover only "the actual cost of operation and maintenance" of the plant. Mr. Smith asks only for rates sufficient to cover such actual cost of operation and maintenance. The items entering into this case, as testified at the hearing, consist of wages of an engineer, wages of a meter reader, cost of fuel, repairs to pump and engine, repairs to pipe system, and cost of bookkeeping and collections. I shall now consider each of these items in detail. Mr. Smith has been paying a wage of $45.00 per month to a person who devotes a part of his time to running the water plant and part of his time to other purposes. This engineer testified that he had demanded an increase to $60.00 per month, and that he would quit unless paid this sum. Mr. P. W. Hughes, who resides on the tract, has written to the Commission that he is willing to run the pumping plant for 35 cents per hour of actual operation, with a minimum wage of $15.00 per month. The pumping plant frequently does not have to be operated for more than an hour or two per day. Under all the circumstances of this case, I find that the Commission would not be justified in allowing an increase over the present wage of $45.00 per month. Mr. Smith testified that he is now paying to William Thornton the sum of $6.25 per month to read the meters each month. He also testified that he himself was attending to the cost of bookkeeping and collections. After the hearing he stated that Mr. Thornton has agreed to do the entire work of reading meters and attending to the cost of bookkeeping and collections for $25.00 per month. This arrangement seems reasonable, and the amount of $25.00 per month will be allowed to cover the entire cost of reading the meters, attending to the bookkeeping, making the collections and otherwise superintending the plant. The total cost of fuel for the years 1910, 1911, 1912 and 1913 has been $396.33, making an average cost per year of $99.08. The sum of $100.00 will be allowed for this item. Bills were presented to show the cost of repairs as well as renewals due to depreciation on the pump and engine for the last six years. The bill for the years 1908, 1909 and 1910 amounted to $617.05 and the bill for the years 1911, 1912 and 1913 to $643.02. The average for the six years is $210.00. This item includes quite large sums properly chargeable to renewals due to depreciation, as distinguished from maintenance. Mr. Stearns of the Stearns Gas Engine Works testified that $150.00 per year would be a fair average for repairs to pump and engine. This amount will be allowed. Mr. Smith testified that repairs to the pipe line, including the cost of material, amount to $5.00 per month. This amount will be allowed. The following items will accordingly be allowed under the head of operation and maintenance of this plant: Engineer's wages Cost of reading meters, bookkeeping, collections and other superintendence Fuel Repairs to pump and engine. Repairs to pipe system.- Total $540 00 300 00 100 00 150 00 60 00 $1,150 00 During the year 1913 the present 62 consumers of water on this system paid a total revenue of $945.00. It is thus apparent that a slight increase in rates must be made so that Mr. Smith may secure "the actual cost of operation and maintenance" which all the consumers have agreed to pay him. On all the facts of this case I find that the rate of 25 cents per hundred cubic feet for quantities under 600 cubic feet, with 20 cents per hundred cubic feet additional and a monthly minimum of $1.50 would yield the revenue to which Mr. Smith is entitled and would be a just and reasonable rate. On the basis of the 1913 water use, this rate would yield a revenue of $1,186.00, but in view of the fact that the increase in rates will no doubt result in some diminution in revenue, it is not reasonable to expect that under the new rates a revenue as high as $1,186.00 will be realized. On the other hand, as more homes are built upon these two tracts and the amount of water consumed is increased, the cost of doing the business will be correspondingly decreased, so that it is just possible that within a few years the rate may again be reduced. For the present Mr. Smith is clearly entitled to the rate herein before suggested. The consumers 1 present at the hearing expressed their entire willingness to pay Mr. Smith such rates as should be necessary under their agreement. As the minimum of $1.50 would include all the water used up to 600 cubic feet per month, there will be no increase at all in the case of many of Mr. Smith's customers. The increases will fall on those who use the largest amounts of water and who have heretofore paid somewhat less than their fair share of the cost of operation and maintenance. It appeared at the hearing that G. W. Wilson was unable, when he turned the water on in his yard, to secure water in his house. During the year 1913 the Commission also received several other complaints with reference to inadequate service on this system, which complaints were held in abeyance pending the hearing on this application. It must be understood that the increase in rates hereby authorized is contingent upon the rendition by applicant of adequate and sufficient service to his consumers, and that unless such service is rendered the Commission's authority to increase rates may hereafter be revoked. I submit herewith the following form of order: ORDER. C. Edgar Smith, owning and operating a water utility for supplying water to consumers in Sunnyside Heights and Original Sunnyside tracts in Los Angeles County, California, having filed an application for authority to increase the rates charged for water, and a public hearing having been held upon said application, and all parties having agreed that Mr. Smith is entitled to such rates as will compensate him for “the actual cost of operation and maintenance" of his plant, and no more, and this application having been submitted and being now ready for decision, the Commission hereby finds as a fact that the existing rates for water, being $1.50 per thousand cubic feet and 15 cents per one hundred cubic feet additional, with a monthly minimum of $1.50, are not sufficient to yield to Mr. Smith the revenue to which he is entitled, and that a fair, just and sufficient rate would be a rate of 25 cents per hundred cubic feet for quantities less than 600 cubic feet with 20 cents per hundred cubic feet for all quantities in excess of 600 cubic feet, with a monthly minimum of $1.50. Basing its order on said findings, and on the other findings which are contained in the opinion which precedes this order, It is hereby ordered that applicant be and he is hereby authorized to establish and file with this Commission the rate of twenty-five (25) cents per one hundred cubic feet of water for quantities less than six hundred (600) cubic feet, and twenty (20) cents per hundred cubic feet for all quantities in excess of six hundred (600) cubic feet, with a monthly minimum of one and 50/100 ($1.50) dollars, to be charged to his customers in Original Sunnyside and Sunnyside Heights tracts in |