An investment in a lot and the cost of its preparation for the erection of a general office building cannot be included in the rate base of a gas company until the building is actually occupied and the rent on present quarters discontinued. [December 6, 1921.] INVESTIGATION of gas rates; company ordered to amend schedule of rates. Appearances: Frank A. Cressey, Jr., for Modesto Gas Company; A. J. Carlson, City Attorney, for Modesto. By the Commission: A public hearing was held by examiner Westover at Modesto in the above case, instituted upon the Commission's own motion, to determine whether or not reported material reductions in the price of crude oil had been sufficient to justify a reduction in rates charged for gas. Exhibits referred to in the testimony, embodying additional information requested by the Commission's engineers, to be submitted after the hearing, have now been received and filed and the matter is ready for decision. The Modesto Gas Company is a utility engaged in the manufacture, distribution and sale of gas in the city of Modesto. The capital investment in physical property was given special consideration in this proceeding. A detailed valuation of this property was made as of April 1, 1916, by the Commission's engineers in connection with Applications Nos. 2206 and 2207. Since that time the company has made extensive improvements and additions to its equipment. A check of these additions and betterments shows that the expenditures are not excessive, but appear to have been wisely made with due consideration to the rendering of adequate service at present and for a reasonable growth of business in the future. Certain of the capital items. have, however, been eliminated from the rate base as nonoperative property at this time. These items include expenditures for a lot and its preparation for the erection of a general office building. This cannot be included in the rate base until the building is actually occupied and the rent on the present quarters discontinued. A few other minor deductions have been made for equipment retired from service. The rate base adopted for this proceeding is as follows: The operating expenses of the Modesto Gas Company have in the past been quite reasonable with the exception of oil use, but the evidence shows a contemplated increase of $9,373.20 in pay roll during the following year while the increase in sales estimated by the company is only 8 per cent. The estimate of the operating expenses used for rate-fixing purposes herein are based upon an estimate of sales amounting to 72,000,000 cubic feet and includes approximately $6,500 of the above mentioned increase in pay roll, which amount appears reasonable. The duty of oil used herein is 11.1 gallons per 1,000 cubic feet sold as compared with the average of 12.6 gallons per 1,000 cubic feet for 1920. This smaller use of oil should not be exceeded under present conditions. ESTIMATED OPERATING EXPENSES. Modesto Gas Company for Year Ending August 31, 1922. The present rates for Modesto Gas Company were established by Decision No. 7581 and became effective May 20, 1920. These rates were based upon an average price of oil of $2.04 per barrel. Between May, 1920, and the present time oil price increased and later decreased to the present price of $2 per barrel. The existing rates have yielded during the past twelve months a gross revenue amounting to $1.875 per 1,000 cubic feet of gas sold. Upon the previously mentioned estimates of sales for the year ending August 31, 1922, these rates will supply a gross revenue of about $135,000. In the following tabulated data it is shown that after deduction for the operating expenses, depreciation and an allowance for accounts which are uncollectible, a sum of $27,400 will be available for return upon the invest ment. ESTIMATED TOTAL REVENUE, EXPENSES AND ANNUAL CHARGES. Modesto Gas Company for Year Ending August 31, 1922. Gross revenue from 72,000 M cubic feet sales at $1.875 ...... $135,000 00 This return is 8 per cent upon the rate base. While there has been a slight reduction in the price of oil below that upon which the present rates were fixed, there have occurred increases in taxes and other operating expenses so that there is practically no change in the total cost of service. No modification in the rates is possible at this time. It is advisable, however, to introduce a form of rate which may be modified, by a supplemental order from the Commission without a hearing, to correct for changes in the price of oil. The cost of producing gas in this system varies by approximately 2.6 cents per 1,000 cubic feet with a variation of 10 cents per barrel in the price of oil. The rates herein will be so fixed as to vary on this basis. P.U.R.1922B. INDEX. ABANDONMENT OF SERVICE. ABILITY TO PAY. As affecting reasonableness of rates, see RATES, 15. As a factor in determining reasonableness of return, see RETURN, 5. ACCOUNTING. Spreading year's coal bill over a year's time, see RETURN, 13. Cost of employing experts making inventories, appraisals, and audits, Expenditures for extensions or replacements improperly charged to Necessity of inventory and audit of books of telephone utility seeking Annotation on accounts, reports and statements of automobile trans- Discussion of the necessity of using the classification of accounts 1. A motor vehicle operator should be required to keep simple but 2. Salaries paid to a financial agent and officers of a public utility ACCOUNTS. Books of utility as evidence in proceeding to obtain injunction against ACCRUED DEPRECIATION. Accrued depreciation in a valuation proceeding, see VALUATION, 20–24. ACTIONS. Constitutionality of statute providing for recovery of penalty in civil ACTUAL COST. Inventory and appraisal of electric property, largely influenced by ADDITIONS AND BETTERMENTS. Security issue to reimburse treasury for moneys expended for, see Duty to furnish facilities and extensions or betterments, see SERV- Demand for greater capacity in transmission line as demand for addi- Estimated investment in new equipment as part of rate base, see ALLOCATION. See APPORTIONMENT. AMMONIA. Production by gas company, see RETURN, 11. AMORTIZATION. See also DEPRECIATION. Item representing depreciation accrued in past years as improper Amortization of appraisal expenses, se RETURN, 20. Amortization of expenses incurred after a flood, see RETURN, 29. ANNEXATION OF TERRITORY. By a city as affecting franchise obligations of railway, see RATES, 49. APPEAL AND REVIEW. Annotation on appeal and review as affecting motor vehicle transporta- Discussion of the duty of appellants with regard to filing records on 1. An appellate court should not substitute its judgment for that 2. Rate making is purely a legislative act and as such the power of 3. A court has not the power to substitute its judgment for that of |