as in the summer months when Long Island towns double their population. Payrolls, taxes, insurance and most of the other items of expense apart from the coal and oil used in producing gas continue about the same in winter months as in summer months. Under such conditions of operation unit cost figures for individual months are worthless. To arrive at present day cost of production and distribution as a basis for a new rate for gas, it is advisable to analyze the latest complete figures for a full year. In the year 1920, when the average cost of operation was $1.40 per thousand cubic feet of gas sold, gas oil, the principal material of manufacture, cost the company an average of 11 cents a gallon or 41 cents per thousand cubic feet of gas sold. In the year 1921 the price has been 12.45 cents per gallon until reduced to 64 cents per gallon under a contract that will cover its needs for upwards of a year, making the cost of that important element 23 cents instead of 41 cents in each one thousand cubic feet of gas for 1920. A rate of charge for gas that would be reasonable in the year 1920, would now be 18 cents too great so far as this single material of manufacture is concerned. Nor is this the only item of expense that requires adjustment. Boiler fuel is now cheaper than it was in 1920, whereas generator fuel is somewhat more expensive. The necessary corrections and adjustments of 1920 expenses to make them applicable to present day conditions are later summarized. The Company has been selling its gas to the Patchogue Gas Company in 1920 at an average price of 92 cents per thousand cubic feet as compared with bare manufacturing costs of 91.64 cents per thousand cubic feet. This last figure does not include any proportion of depreciation, taxes, insurance, administration, interest on investment or any of the other elements which should enter into a proper rate to be charged for gas furnished to the Patchogue Company, which, if not carried by the gas furnished to the Patchogue Company, may need to be otherwise provided by other consumers, or result in a company deficit. The deficiencies, which have been shown above, may have been partly due to price schedules for gas sold to certain consumers. The Patchogue Company is charged 12 per cent as representing the gas lost and unaccounted for, whereas the experience of the Long Island Lighting Company for the full year 1920 was 15.41 per cent and for the first four months of 1921 was 22.84 per cent. During the first four months of 1921 gas was sold to the Patchogue Company for $1 per thousand cubic feet, whereas the bare cost to manufacture without taking into account the other elements above mentioned was $1.23 per thousand cubic feet. The Company has since raised the price to the Patchogue Company to $1.20 per thousand cubic feet, which, at the sale of 35,470 cubic feet estimated for 1921 would amount in revenue to $42,564. This figure of $1.20 per thousand cubic feet has been carefully checked and is allowed. An analysis of the costs of operation for 1920 as submitted by the Company shows: Total cost of operation for sale of 157,358 M cu. ft. $221,367.64 785.82 $220,581.82 In this amount, representing the cost of operation, there are included certain items which need to be examined before the 1920 figures can be used toward any estimate of 1921 costs. They are the following: Gas Oil. The figure of $64,995.05 represents 593,944 gallons at $.10943 $64,995.05 At the present contract price of $.0625 per gallon, the amount would be 37,121.50 Which is a saving of $27,873.55 Boiler Fuel. The figure $14,595.93 represents 1567 tons at $9.315 $14,595.93 At the present price of $6.67 per ton, the amount would be.. 10,451.89 This is a saving of $4,144.04 P.Ú.R.1922B. Taxes. $13,819.45. This figure is an apportionment by Exhibit Real property and special franchises Federal income Federal coupon The reasons why these are not properly charged to gas consumers are as follows: $625.13 $839.66 $7,960.20 $1,527.30 Real Property and Special Franchise Tax $625.13 This, by Exhibit 18, belongs to the electric and not to the gas operations. Excess dividends, state tax $839.66 Federal income tax .... The theory of these taxes is that the government takes away a portion of the profits of corporate and individual enterprises to meet the needs of the governmental administration and the taxes should be borne by the enterprise after the profits of the year have been determined. They may not be placed upon the consumers of the Company's service. Federal coupon tax ... This accrues under a tax covenant in the Company's bonds and is paid on the interest received by the holders of the bonds. It represents an amount which the Company has agreed to pay in order to aid the sale of its bonds. It is really an adjustment in the rate of interest and is no more chargeable to the consumer in the rate to be paid than any other interest charge. $7,960.20 $1,527.30 Besides these amounts not chargeable at all to the gas consumer there are included in the $51,040.44 of the total applicable to the year a sum for taxes on real property, on special franchises, on gross earnings and for Federal capital stock tax which in part only should be borne by gas output. Deducting the amounts above mentioned as disallowed and apportioning the other taxes between gas and electric, there is left as chargeable to gas not $13,819.45 but $9,390.58, which results in a saving of $4,428.87. In all, the deductions above mentioned are as follows: Generator Fuel. $11.128 $40,538.09. This represents 3643 tons at The price of generator coal has fluctuated. The average for the first four months of 1921 was $11.603. The June price $11.094. The 10 cent rate per month after June will probably increase this by the present time. ..... Taking $11.394, the 1920 figure for coal would become an increase of General Amortization. $3,484.84. This allowance in 1920 operating expenses for annual depreciation is wholly inadequate. On the figure for depreciation adopted in this opinion, $17,129.78, the allowance for the annual depreciation should be increased for the year by The total additions above allowed for generator coal and amortization amount to ...... $40,538.09 $41,508.34 $969.35 $13,644.94 $14,614.29 The deductions for gas oil, boiler fuel and taxes amount to $36,446.46 Leaving a net deduction of $21,832.17 which, if taken from $220,581.82, the 1920 figure of operating expenses, will leave $198,749.65 as the total operating expenses for the sale of 157,358 M cubic feet of gas adjusted for the purposes of consideration in the finding of a rate to be charged for gas from now on. This would make an adjusted necessary operating expense for the year 1920, $198,749.65, which on the basis of 157,358 M cubic feet sold in 1920 would be equivalent to $1.263 per thousand cubic feet of gas sold. From a comparison of the operating figures given above for the years 1918, 1919 and 1920 and from the increases shown in the use of gas oil in the first four months of 1921 as compared with 1920 in the same months and from the gas sold in the same four months in 1920 compared to the gas sold in the rest of that year, applied to 1921, the sales of gas for 1921 are estimated to be as follows: At the rate of $1.263 per thousand cubic feet as the operating expense of 1920, adjusted, the operating expense to produce 186,758 M cubic feet in 1921 would be The evidence tends to show additional expenses for 1921: $235,875 Salaries apportioned to gas Taxes apportioned to gas $1,500 2,206 $3,706 but of this amount the greater part is taken care of in the increased output, amounting to 186,858 M cubic feet. The residue remaining should be added, however, namely making operating expenses for 1921 ... 1,056 $236,931 New Rate. Assuming that the costs of the coming period will not exceed the operating figures as adjusted, and that the sales of gas will be 186,758 M cubic feet for 1921, the rate for commercial or private consumers metered gas can be computed as follows: Revenue from Patchogue Gas Company at $1.20 per thousand cubic feet 42,564 Miscellaneous gas revenue 10,054 $55,268 Commercial or metered sales to earn $267,256 Dividing this amount by the amount of estimated metered sales for private consumption, which is 148,644 M cubic feet, the result will represent the amount per thousand cubic feet which the commercial metered sales consumers should bear, that is to say $1.80. The figure of $1.80 just given is on the basis of gas oil at 6.25 cents per gallon under the contract which is at present running. Since June 30th, when the temporary rate of $2 per thousand cubic feet and $1 minimum charge per month, as specified in that order, was permitted, the cost of gas oil has been for a considerable part of the time not 6.25 cents per gallon but 12.45 cents per gallon. The effect of this is to increase the price which should properly be allowed for gas from June 30, 1921, to October 1, 1921, to $2 per thousand cubic feet. From October 1, 1921, the price should be $1.80 per thousand cubic feet. The order of the Commission of June 28, 1921, which pending final determination in this case fixed a temporary rate of $2 per thousand cubic feet, with a monthly minimum charge as therein specified, had in it two conditions: 1. That out of the increased revenues the company should set aside not less than $1,000 per month to meet accruing depreciation; 2. That the company should, after final determination herein and on the order of the Commission, refund to the consumers any excess as shown by its books of the temporary rate, with interest |