Full opinion text
DIETRICH, District Judge. The suit is brought to enjoin the enforcement of a set of rates for electric service, prescribed by the Public Utilities Commission of Idaho in its Order No. 939, dated February 29,1924, Record, vol. 1, p. 122. Having taken over several hydroelectric generating plants of smaller competing companies, which went into liquidation, plaintiff has further developed them and united them into a single system, from which it distributes electric current for light and power, for heat in cooking and heating water for domestic use, and for power in pumping water for irrigation purposes. Its territory is a small part of Eastern Oregon and the whole of Southwestern and Southern Idaho. In Southeastern Idaho it comes into contact with the Utah Power & Light Company, a neighborly, if not a kindred, company. In its field it is without substantial competition. The Idaho Public Utilities Commission, defendant, is created by the state statutes, with functions usual to such bodies, and has the power and duty to require that the rates charged be just, reasonable, and nondiseriminatory. Two main contentions are put forward by plaintiff; the first being that Order No. 939 is invalid because of irregularity in procedure by the Commission, and the other that the rates thus established are so low as to be confiscatory under the federal Constitution. Both issues are conceded to be within, our jurisdiction. We first discuss the question of confiscation, and hence for the moment we defer analysis of certain specific schedules, the sufficiency of which, viewed by themselves, is-challenged, and consider only whether the rates fixed by the order, looking at them in their entirety, amount to the taking of plaintiff’s property without just compensation. San Diego Land Co. v. National City, 174 U. S. 739, 754,19 S. Ct. 804, 43 L. Ed. 1154. In respect to such an issue, the burden of proof is upon the plaintiff. Des Moines Gas Co. v. Des Moines, 238 U. S. 153,163, 35 S. Ct. 811, 59 L. Ed. 1244. And the proof must be clear and convincing. “The judiciary ought not to interfere with the collection of rates established under legislative sanction, unless they are so plainly and palpably unreasonable as to. make their enforcement equivalent to the taking of property for public use without such-compensation as under all the circumstances; is just both to the owner and to the publiej. that is, judicial interference should never oe~ cur, unless the case presents, clearly and beyond all doubt, such a flagrant attack upon the rights of property under the guise of regulations as to compel the court to say that the rates prescribed will necessarily have the effect to depy just compensation for private property taken for public use.” San Diego Land Co. v. National City, 174 U. S. 739, 754, 19 S. Ct. 804, 810 (43 L. Ed. 1154). In San Diego Land & Town Co. v. Jasper, 189 U. S. 439, 441, 23 S. Ct. 571, 572 (47 L. Ed. 892), a further statement of the rule is made as follows: “In a ease .like this we do not feel bound to re-examine and weigh all the evidence, although we have done so, or to proceed according to our independent opinion as to what were proper rates. It is enough if we cannot say that it was impossible for a fair-minded board to come to the result which was reached.” See, also, Van Dyke v. Geary, 244 U. S. 39, 37 S. Ct. 483, 61 L. Ed. 973; Georgia Ry. Co. v. Ry. Com., 262 U. S. 625, 43 S. Ct. 680, 67 L. Ed. 1144; Darnell v. Edwards, 244 U. S. 564, 37 S. Ct. 701, 61 L. Ed. 1317; Knoxville v. Knoxville Water Co., 212 U. S. 1, 29 S. Ct. 148, 53 L. Ed. 371; Minnesota Rate Case, 230 U. S. 352, 452, 33 S. Ct. 729, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916A, 18; N. P. R. R. v. North Dakota, 236 U. S. 585, 35 S. Ct. 429, 59 L. Ed. 735, L. R. A. 1917F, 1148, Ann. Cas. 1916A, 1. And, it is to be added, where a factor in the problem involves prophesy, or rests upon mere opinion evidence, the commission was not,'nor are we, bound to accept absolutely and without qualification one or the other of two conflicting views, or the opinion of a single expert where but one testifies. The Conquerer, 166 U. S. 110,17 S. Ct. 510, 41 L. Ed. 937. And see Willcox v. Consolidated Gas Co., 212 U. S. 19, 50, 51, 29 S. Ct. 192, 53 L. Ed. 382, 48 L. R. A. (N. S.) 1134, 15 Ann. Cas. 1034. We are to bear in mind, too, that the term “reasonable” or “just” return has a double aspect, one legislative and the other judicial, and that we are here concerned with it only in the latter sense. So understood, it is the equivalent of nonconfiscatory. Judicially a rate is unreasonable only when it yields a return less than the minimum which the capital invested may of right demand. In the legislative aspect the return may exceed such amount; that is, the Legislature or the commission may, without being unjust or unfair to the rate payer, add a substantial increment to this minimum in order to carry out some public policy. Detroit & M. R. Co. v. Michigan R. Com. (D. C.) 203 F. 864, 870. “A commission or other legislative body, in its discretion, may determine to be reasonable and just a rate that is substantially higher than one merely sufficient to justify a judicial finding in a confiscation case that it is high enough to yield a just and reasonable return. * * * It is well known that rates substantially higher than the line between validity and unconstitutionality properly may be deemed to be just and reasonable, and not excessive or extortionate.” Banton v. Belt Line Ry. Co. (Dec. May 25, 1925) 268 U. S. 413, 45 S. Ct. 534, 69 L. Ed. 1120. See, also, San Diego Co. v. Jasper, 189 U. S. 439, 23 S. Ct. 571, 47 L. Ed. 892; Galveston Electric Co. v. Galveston, etc., 258 U. S. 388, 42 S. Ct. 351, 66 L. Ed. 678; Chesapeake, etc., v. Whitman (D. C.) 3 F.(2d) 938; Spring Valley Water Co. v. San Francisco (D. C.) 252 F. 979; U. P. Ry. Co. v. Com., 95 Kan. 604,148 P. 667; City of Portsmouth v. P. U. C., 108 Ohio St. 272,140 N. E. 604. It follows that an expression or finding of the defendant commission of what it deemed to be just or reasonable is not necessarily to be understood in a judicial sense, or as implying that, in the view of that body, anything less would be confiscatory. Bate Base. Formally, at least, both parties recognize the rule to be that for rate base we are to take the fair value of the plant as of the date to which the inquiry, touching sufficiency of net return, relates, adding thereto a reasonable amount for working capital. Both studies are made along the line of the reproduction cost theory. In the briefs is to be found some discussion of the question whether or not cost of reproduction is to be considered the “dominant” factor. But mere terminology is unimportant; whether dominant or not, it is a prime factor. It is not to be used as a formula, and is subject to many qualifying considerations; but nevertheless, broadly speaking, it is basic, and in both studies it is generally so treated. The parties also agree upon taking June 30,1924, as the date for fixing the value of the rate base, and the evidence of reproduction cost, directly or indirectly, relates to that date. I. Property in Existence December 31, 1919, and Still Embraced in the Plant as of June 30, 1924, Exclusive of Accounts (1) Organization, (2) Franchises, (3) Water Bights, (37) General Office Equipment, and (39) Utility Equipment, Which Five Accounts are Considered Separately. (Note. — Both sides carry the same classifications under identical account numbers. For illustration, see Plaintiff’s Exhibit 16a, vol. 1, p. 238, and Defendants’ Exhibit 27, p. 419.) Reserving for separate consideration the five accounts mentioned in the above heading, and deferring consideration of the factors referred to as “Working Capital,” “Going Concern Value,” and “Depreciation,” the parties have divided the property into two groups as indicated in the heading; First, the properties in existence December 31, 1919, and still constituting a part of the system; and, second, the additions made during the period intervening between that date and June 30, 1924. Touching the latter group there is no substantial controversy. Confining our attention to the first group, it appears that Rankin, plaintiff’s engineer, fixes the reproduction cost as of June 30, 1924, at $13,178,318, which is $1,616,627 in excess of the appraisal by Kopelman, the defendants’ engineer. (See first two columns Defendants’ Exhibit 43, vol. 1, p. 474, and Plaintiff’s Exhibit 45, vol. 1, p. 486.) The slight discrepancy in the two tabulations is negligible. Aside from the somewhat distinctive Oxbow item of $350,000, and interest, the differences relate largely to land values and overheads, or “undistributed costs” of different kinds, and involve many questions of a speculative character. It will aid in understanding the issue to say that, some time prior to the making of Order No. 939, plaintiff, in compliance with the requirements of the commission, at great expense caused to be prepared and filed with the commission a detailed inventory of all its property, both used and*unused, together with its appraisal thereof as of December 31,1919. With unimportant exceptions, both parties now resort to this as a complete and correct descriptive list in detail of the property as it existed at that date, eliminating, of course, from their consideration in making their apr praisals, such items as did not, on June 30, 1924, constitute any part of the useful plant. They differ only in respect to reproduction cost and the factors entering into such cost. Moreover, there is no serious contention by plaintiff that there was any increase in land values or construction costs during the period from 1919 to 1924; if there was any change, the testimony tends to show a decrease, but the point is not of great importance. For present purposes we may therefore assume that the reproduction cost was substantially the same in 1919 as it was in 1924. As a part of its elaborate inventory as of December 31,1919, plaintiff included a detailed appraisal upon the basis of historical actual cost, in so far ás .that could be ascertained, and also of reproduction cost as of December 31, 1919. In respect thereto, it now alleges in its complaint: “Pursuant to its intention to procure an adjustment of its rate structure, and in compliance with said act of the Legislature, the power company made and prepared a detailed inventory and appraisal of its property in Idaho and Oregon. Said inventory and appraisal was prepared with great care and in great detail; inspection and count of all physical property, so far as the same could be examined, was made in the field, and an examination was made of the original cost of said property, so far as ascertainable, as required by the said act of the Legislature and the instructions of the commission thereunder, and also of the cost of reproduction of said property, and included all property of the power company in both Idaho and Oregon, operative and nonoperative, as of December 31, 1919.” Though he personally shared in making it, the plaintiff’s engineer now declines to abide by this appraisal, which, as we have seen, the complaint alleges “was prepared with great care”; and hence the major part of the difference between him and the commission’s engineer in their appraisals. In a measure similar considerations apply to the large difference in respect to land values. While Kiersted, who is now and in 1919 was in the plaintiff’s employ, did not himself directly make the appraisal of 1919, he caused the same to be made by realtors, presumably competent; he supervising the work and checking the reports. The present appraisement he himself made in the field; his values being greatly in excess of those of his agents in 1919. In view of these facts a most serious question arises whether, after a public utility company, in the course of proceedings to establish rates, has presented to the commission appraisals of its property, carefully made, and the commission has acted upon the basis of such appraisals, the company can, without first seeking relief from the commission, apply to a court to set aside as being confiscatory an order so made by the commission. But, however that may be, weight cannot be denied the consideration as bearing upon the persuasiveness of the theories and opinions now put forward by the witnesses responsible for the former appraisals. It is not a ease where a witness has, through inadvertence, or .by reason of faulty information, testified erroneously in respect to substantive facts. Tbe differences involved in tbe issue are largely sucb as arise out of a resort to different reasonable theories and. assumptions as the basis of computations, or as are due to the fact that the evidence largely consists of opinions necessarily involving a measure of speculation. 1. Lands. The general item covers accounts 5, 6, 7, 9,10, and 12, namely, “Power Plant Lands,” “Transmission Lands,” ■ “Substation Lands,” “General Office Lands,” “Store Department Lands,” and “Other Lands.” While we have considered the evidence and the briefs in respect to the several classes in detail, we here group them together and separately refer to only certain features. Plaintiff’s appraisal, exclusive of the so-called overheads in acquiring lands, and interest during construction, aggregates $234,069. It adds $19,311 for overheads and $20,267 for interest, making a total of $273,647. Overheads are computed on all but the “Transmission” account, by adding to direct cost 6% per cent, for “engineering and supervision,” and 6 per cent, for “undistributed construction costs”; that is, as explained, abstracts, recording, legal expenses, etc. The interest is computed at the rate of 8 per cent, for one year on this aggregate. Defendants’ appraisal is $66,808, direct cost, to whieh is added interest, computed upon the basis used by plaintiff, $3,801, or a total of $70,609. No allowance is made for engineering or undistributed construction costs. It will thus be seen that plaintiff’s appraisals, exclusive of overheads and interest, is $167,261 higher than that of defendants. Of this amount $81,206 is on account of the six power plant sites and $73,444 for transmission rights of way. As to power plant lands in a high degree, and as to the rights of way in a very considerable measure, the elaborate discussion of the difficulties in making an appraisal and of proper and improper considerations found in the opinion of the Supreme Court in the Minnesota Rate Cases, 230 U. S. 352, 443, et seq., 33 S. Ct. 729, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916A, 18, is applicable. Apparently there is no standard to whieh the value of the power plant lands can be referred; for that reason, and in the light of the Minnesota Rate Cases, it is doubtful whether plaintiff’s right of way agent, the only witness who testified directly upon the subject, was competent to express an opinion. He did not as an expert testify as to the market price, for there is no market standard. As in the Minnesota Rate Cases, he really makes an attempt, however disguised, to fix the value of property to the plaintiff under conditions whieh no one can say would exist, but for the fact that the sites have been used and that such use has in a measure brought about the very conditions whieh contribute to value. It would seem to be one of those eases where, if we put aside the actual cost theory and take the most favorable view to plaintiff, a so-called expert is little, if any, more competent than a judge or a jury to express an opinion, whieh in either case is but a conclusion from the pertinent facts. Plaintiff also resorts to the charge made by the government for use of public land needed in the development of power plants. But by a parity of reasoning it could be argued that transmission rights of way are of no value, because they may be acquired over public lands at a nominal cost. Both laws were doubtless enacted in furtherance of public policies without regard to the fair value of the lands. If such laws are to be taken as establishing standards of value, what, might be asked, would be the fair value of a narrow mountain canyon upon the public lands, desirable both for railroad right of way, for whieh no charge is made, and for power development in whieh case a charge is made ? Entertaining the view that there is no other available standard, defendants’ engineer took as the measure of value the original cost of these lands, this being the standard adopted by plaintiff in its appraisal of December 31,1919. As to the transmission rights of way and all other lands, plaintiff’s engineer adopted the appraisement of*its right of way agent and defendants’ engineer the valuation made by agents employed by him for that purpose. While appraisement, especially of power site land, is attended with almost insuperable difficulties, we do not think that the original cost, where the property was acquired many years ago, is a correct measure. Some allowance should be made for overheads, but 12% per cent, is thought to be excessive. More manifestly is this true of the item for engineering. Most of the possible engineering is a necessary construction element, in respect to whieh ample allowance is made under other heads. Let us suppose that at the outset plaintiff was the owner of large bodies of lands embracing the small tracts used, it would be under the necessity of determining the' most feasible locations for its power plants, transmission lines, and other structures. All such engineering would necessarily be considered as cost of construction, and not of acquiring the land; for, under the hypothesis, plaintiff already has title. But it is quite unimportant whether such investigation and engineering work are done before or after acquisition of the lands; the function is the same in either case. Engineering incident to acquiring title must consist mainly in defining boundaries and computing areas. But in respect to building sites the acquisition almost without exception is of lots, in platted townsites, and in respect to rights of way the location of the pole line, an element of construction, is generally all that is required for descriptive purposes. Even in some eases of power sites, the acquisition was of tracts described in recorded surveys. The other item of overhead, abstracts, recording, etc., amounts in plaintiff’s set-up to $5,944 for the six power sites. In case the valúe of the sites is reduced one-half, the item is correspondingly reduced, although presumably there would be no difference in the actual expenditures it is supposed to cover. The 40 acres at Horseshoe Bend we exclude as being neither used nor useful; for like reasons a portion of the 8 acres at Weiser is excluded. Applying as best we can to the evidence the principles approved in the Minnesota Rate Cases, we estimate these several land accounts as follows: The item of “Other Lands” plaintiff concedes to be erroneous, and should be ignored. The total of the five items is $144,712, to which we add interest at 8 per cent, for one year, or $11,577, making a grand total of $156,289. 2. Accounts Nos. 16, 18, 19, 20, and 21— Buildings, Fixtures, and Grounds (Other than Power Plant). There are six accounts' for “Buildings, Fixtures, and Grounds.” (By grounds we understand is meant improvement of grounds, aside from the original cost of site.) One of the accounts, No. 13, covering power plant buildings, etc., will be considered in connection with other related power plant structures. We here group, accounts Nos. 16, 18, 19, 20, and 21, covering buildings, fixtures, and grounds for substations, stores department, utility equipment, general office, and other buildings, fixtures, etc. Kopelman’s aggregate for the five accounts is $317,206, while Rankin’s is $286,418. The methods pursued are so different that comparison is impracticable, and inasmuch as plaintiff, waiving discussion, expresses a desire that its appraisal be taken, we adopt $286,418 as a measure of reproduction cost. 3. Accounts Nos. 13, 24 and 25, Namely, Power Plant Buildings, Fixtures and Grounds, Hydraulic Power Works, and Power Plant Equipment. , These are the three accounts covering power plant structures. Rankin’s aggregate is $5,473,523; Kopelman’s, $4,811,897 — a difference of $661,626. (Volume 1,’p. 498.) In the main the difference is to be found in the larger allowances made by Rankin for omissions (including loss, breakage, and waste), contingencies, overheads, interest during construction, and the item of contractor’s fee, which Kopelman ignores entirely. Both parties compute interest at the same rate and for the same period; Rankin’s excess being due to the larger base used by him. The difference in interest is $49,246, and the 4 per cent, contractor’s fee allowed by Rankin amounts to $167,571. The two items aggregate $216,817, which, deducted from the total difference of $661,626, leaves a remainder of $444,809. By plaintiff this is regarded as covering contingencies and omissions, but under defendants’ set-up it is to be regarded as representing the difference in allowance for field overheads or undistributed field costs, including omissions and contingencies. In either view the figures are not precisely accurate, for there are other differences in the set-ups, and this is the net result of all.. But for practical purposes it may be said to represent a difference in overheads and undistributed costs, including contingencies and omissions. At page 680 of volume 2, Rankin explains what he means by contingencies and’ omissions. Undoubtedly the possibility of' such expenses should be given consideration, in estimating the total cost. Upon that point there is no controversy; Kopelman concedes-it. Furthermore, in appraising an existing-plant by inventory, some of such items would not appear. Sag in transmission wire would! be observable, but a lost erossarm or a broken insulator would not. In projecting a new plant, they would have to be estimated as contingencies; and also in appraising the cost of an existing plant, where there are no records of actual cost, they would have to be estimated in like manner, except in the comparatively few eases where they are to be observed in the structures. So in appraising the cost of reproducing new the plant as it stood in 1919, it became necessary to give consideration to this factor, and in making its appraisement as of that time, which as we have seen plaintiff alleges was carefully made, it was considered, and allowances were made on account thereof. In passing, it may be observed that there is nothing of substantive value in the fact that Rankin carries numerous classifications. For example, he allows a percentage for “omissions, loss, breakage, and waste,” and separately another percentage for “contingencies.” But plainly omissions, loss, breakage, and waste are contingent until they happen, quite as much as any other possible contingency, and after it has happened a contingency ceases to be contingent! In reality it is thought that all such items are contingencies and should be carried under the one head. So, if we make just allowance for contingencies, it is quite unimportant whether we treat them as direct or indirect field costs. If there were an established percentage, it would, of course, be material to determine upon what base it is "to be computed; but there is no such established rate, and hence, if the ■result is the same, it is immaterial whether we reach it by computing a higher percentage on a smaller base, or a lower percentage upon a larger base. Accordingly, while we may be of the opinion that contingencies are generally more properly carried as indirect field costs, we pass the point as being of too slight importance to warrant further discussion. The difference between the engineers in the main arises out of the fact that upon the one hand Kopelman insists that the appraisement made by plaintiff as of December 31, 1919, fortified, as he says, by his own judgment, based upon other data and independent observation, is fair, while Rankin, ignoring that appraisement entirely, insists upon estimates deduced from plaintiff’s experience in new construction work carried on during the period from December 31, 1919, to June 30, 1924. Much may be said in support of either view, but obviously neither is' necessarily conclusive. In the 4% years since 1919 plaintiff has done a large amount of construction work, approximating $5,000,000, and it may be assumed that its accounts have been more complete and more scientifically kept than those of its predecessors. But, on the other hand, much of the work done during that period has consisted of adding to or replacing old units of the existing plant, and for that reason the elements of uncertainty are not always comparable to those incident to wholly new construction. While Rankin states that he derives the percentages from this specific experience, the experience itself is not brought before us in any concrete form. He made no computation of the amount of any item of contingency as realized in such experience, and if a “eontin'gencies” account was kept, manifestly its significance in respect to some other job or in respect to the present problem would depend upon divers considerations: How was it kept? What went into it? If it represented the difference between what was shown on the blueprints or was called for by the specifications, and if it was made ultimately to balance preliminary estimates with actual, realized cost, then how carefully were the blueprints prepared, with what detail and degree of accuracy were the specifications drawn, and what were the bases of the preliminary estimates of cost, and with what judgment and care were they made? Upon these points we are not advised, and while the witness repeatedly says he resorted to the plaintiff’s experience for the 4% years, he does not explain by what process he ascertained the facts of such experience, or how he made his deductions therefrom. In truth, when in respect to his set-up for transmission costs, he was on eross-examination asked the question, “How do you arrive at the field overhead which -you add for loss, breakage, omission, etc.?” his answer was:' “That is entirely a matter of judgment. I know of no way to determine it.” Apparently the answer is equally applicable to the whole subject of contingencies and omissions, both in this and in other accounts. It is a matter of judgment. If it is a matter of judgment, while some light may be gotten from the four and a half years’ experience,,the judgment of 1919 was not wholly benighted. Plaintiff had had between 3 and 4 years’ actual experience in operating the property. It made a very exhaustive study of it for the purpose of inventory and appraisement. It had done some, though not a large amount of, construction work during the period of its ownership, and presumably kept complete and accurate records which were available and used in making the appraisement. It had had a part of the experience upon which it now relies between December 31,1919, and June 30, 1924, for it must be borne in mind that while the ap-praisement was made as of December 31, 1919, it was not in fact made until a later date. It had partial records of actual construction cost kept by the original owners by whom the work was done. The art was not new, and presumably there was. available to plaintiff’s appraising agents the experience of other companies in other fields in the construction of similar works. And recognizing the potency of the motive of self-interest, we must assume that plaintiff attempted at that time to make as favorable a showing for itself as was reasonably possible. It claimed an aggregate of approximately $930,000 for field'overheads, including $168,522 for contingencies, $157,408 for omissions, and $185,416 for unclassified expenditures. The susceptibility of overhead percentages to variation is exemplified in the General Office Equipment Account, in itself of little importance, but referred to for illustrative purposes, because it is comparatively simple and is more within the range of our common knowledge. In its set-up for 1919, plaintiff added as overhead upon this account 3 per cent., while presently it claims 7% per cent. Contractor’s Fee. As already indicated, plaintiff adds for what it calls contractor’s fee 4 per cent., or $167,571, computed, as we understand, upon what are termed field costs in these three accounts, and a similar addition is made in account No. 28, “Transmission System,” amounting to $82,488. It would seem that this is not intended as compensation or profit to a construction contractor in the ordinary sense, for doing work in the field. The set-up is upon the assumption that the work is done by plaintiff itself, with adequate allowance for engineering, supervision, and field and other general overheads. In explanation of the charge, plaintiff’s engineer testifies that in his opinion, if the 4 per cent, were not paid to what he calls a contracting firm, the plaintiff itself would be under the necessity of maintaining quarters in a commercial center, preferably New York, “in order to bring about the lowest possible cost of the work.” (Volume 2, p. 31.) The service for which the $250,059 is to be paid in constructing generating plants and transmission system, as they existed in 1919, is such ■service therefor as would be rendered in New York. In further explanation, the engineer testifies that such services would consist of negotiations for the purchase of equipment, by which better prices would be gotten, holding conferences with manufacturers to determine what is best suited, with a view of possible changes in specifications, making inspections in factories and witnessing factory tests, expediting shipments, sending out tracers, etc. (Volume 1, pp. 20, 21.) In the first place, we think $250,000 to be excessive for such a service. The period assumed by both sides for the construction program is two years, and such allowance would therefore be at the rate of $125,000 a year for the “contractor,” or approximately $400 per day, exclusive of Sundays. In the second place, plaintiff includes under other headings charges which in part must relate to the same class of service. We have not taken the pains to segregate for this purpose the costs for property as of December 31, 1919, from later additions, but in its set-up for the entire plant as of June 30,1924, plaintiff charges, in the four accounts for which the contractor’s fee is claimed, $88,115 for purchasing and warehousing, and in accounts 13, 24, and 25 alone, for engineering in New York, $57,754. This engineering in New York, it is to be noted, is in addition to local engineering, which in the four > accounts amounts to $199,900, and still other engineering and supervision amounts to $432,242. (Defendants’ Exhibit 29.) Finally, it would seem to be clear that, if the plant is to be charged with the expense of obtaining reduced prices of equipment, it should be credited with the fruits of such service. Yet we find that, in making its set-up of cost of reproduction, plaintiff adopted, as the measure of cost of materials, quotations given it by manufacturers in response to its request for prices; such request being accompanied with the explanation that the prices were desired for valuation purposes. No consideration was given to the price which might be obtained for quantity purchases or on competitive bids. Prices of standard materials and supplies were apparently taken from published lists. We are persuaded that so much of this item as has merit is more than compensated by the reduction in material costs which could be obtained upon quantity purchases, under such competitive conditions as would prevail in case of actual construction, as compared with the price standards here used in making estimates. Hence the item will be rejected. Upon consideration) we allow upon these three accounts $4,565,000, to which $365,200 is added as interest during construction, making a total of $4,930,200. 4. Account No. 28 — Transmission System. Exclusive of interest, Rankin’s appraisal is $2,413,013; Kopelman’s, $2,155,'651 — a difference of $257,362. The difference involves substantially the identical considerations discussed- in the preceding subdivision No. 3. We might add, in respect to the 4 per cent, contractor’s fee, amounting in this account to $82,488, that it would be interesting to know what the New York “contractor” would do to earn it. Right of way does not enter into the account; the poles and cross-arms are presumably purchased in Idaho, or in neighboring states; wire and insulators are standard, and the former, at least, plaintiff informs us, is not subject to quantity price; and we áre not advised that factory tests or conferences in respect to design are required. Construction is a matter for local engineering and supervision. The item is excluded, and upon this account as a whole we allow $2,200,000, with interest amounting to $176,000, or a total of $2,-376,000. 5. Accounts Nos. 29, 31, 32, 33, 35, 36, 38, and 40. In no one of these accounts is a contractor’s fee claimed, and generally they involve the other considerations discussed under the preceding paragraph No. 3. No purpose would be served in treating them separately. In some eases the difference in results is large, and in others comparatively small. In one account Kopelman’s appraisal is substantially larger than Rankin’s. Excluding interest, in respect to which both engineers agree as to method, the appraisals are as follows: We allow for the accounts in the aggregate $3,711,000, adding interest, $296,880, or a total of $4,007,880. 5. Oxbow Unit. One of the plaintiff’s predecessors projected a large power plant on the Snake river at Oxbow, near Huntington, Or. After a considerable expenditure, unexpected obstacles were encountered, and further development was suspended, if not abandoned. During subsequent receivership, to meet an emergency, a small temporary unit was installed. The head is small, and owing to want of dam control and accumulation of ice in the winter the ■generation is variable and uncertain, running from 100 to 700 k. w. There is no attempt to resort to reproduction cost in fixing the value, but plaintiff seeks to capitalize the service value at $400,000, and defendants contend that a substitute plan of equal serviceability could be installed at a cost of about $59,000. For the purposes for which it is used, the value of the unit necessarily depends largely upon the maximum generation which may be expected at all times, and, as we have seen, that is little in excess of 100 k. w. We do not understand plaintiff’s contention to be that a plant of the general character proposed by defendants is impracticable, but only that such a plant would have to be larger than the one the cost of which is estimated at $59,000. At least we are convinced that a larger plant would render the service. Considering all the evidence, we estimate the value of the unit at $150,000. II. Accounts Nos. 1,2, 3,37, and 39 — Organization, Franchises, Water Bights, General Office Equipment, and Utility Equipment. As already indicated, following plaintiff’s analysis, we have excluded from the foregoing consideration the above numbered and entitled accounts,-and in harmony with the treatment thereof by both parties we now briefly discuss their value as of June 30, 1924, without regard to the appraisement of December 31,1919. (a) Organization. Plaintiff’s appraisal is $500,000; defendants’, $366,524. We have given consideration to the bases of both appraisals, but it would unduly prolong the opinion to discuss them. We allow $400,000. (b) Franchises, On this item the parties agree, and therefore we allow $14,688. (c) Water Bights. Plaintiff’s appraisal, $201,046; defendants’, $39,751. The difference consists in the actual cost to plaintiff and its predecessors of lands flooded by the generating plant at American Falls, aggregating $149,347, to which plaintiff adds interest during construction, amounting to $11,984. The federal government is installing there a large irrigation dam, and has entered into a contract with the plaintiff by which, for certain considerations, title to the flooded lands is to be conveyed to the government. But for this contract defendants would not question the item. Ultimately it will probably be proper to adjust plaintiff’s accounts, so as correctly to reflect the status which will result from the execution of the provisions of the contract. But, inasmuch as of June 30, 1924, the contract was still executory, and the benefit plaintiff is to receive from the contract is in part, at least, to contribute to the value of its plant in use, we deem it proper here to carry the item as of the cost of lands under the presumption that what the plaintiff is getting from the government is a full equivalent. We therefore allow the full amount of plaintiff’s claim, namely, ‘ $201,046. (d) Account No. 37 — General Office Equipment. Plaintiff’s appraisal is $115,247; defendants’, $104,086. The difference consists of a charge by plaintiff for overhead, $7,806, and interest during construction, $3,355. The property items entering into the account are so numerous that defendants’ engineer accepts without qualification plaintiff’s inventory and appraisal, but rejects the two charges for interest and overhead. As to interest, there would seem to be no need for paying for such property until it is received and put in use, and there could be need for but little of it while the plant is in the course of construction, and, if any of it was so used, such use is otherwise covered in general overhead, field overhead, and camp and office equipment. There should be some compensation for planning and purchasing, and on that account we add 3 per cent, to cost, which is the percentage plaintiff itself claimed to be reasonable in its 1919 appraisement of such overhead. (Volume 1, p. 442.) On this account we allow $107,209. (e) Account No. 39 — Utility Equipment. The amount was agreed upon, and accordingly we allow $52,696. III. Property Additions from Jarmory 1, 1920, to June 30, 1924, Valued as of the Latter Date. Plaintiff’s aggregate appraisal on these additions is $6,399,178. Defendants’ engineer’s estimate is slightly higher, but upon plaintiff’s suggestion, to avoid necessity of discussion, we take its figures. It concedes that $31,857, the appraised value of the Caldwell building, should be deducted, for the reason that the building is erroneously included in the set-up. Making this deduction, we allow $6,367,321. IV. Property Additions from June 30, 1924, to December 31,1925. Inasmuch as, for the purpose of ultimate deductions, operating revenues for the whole of 1924 and for 1925 are to be considered, and possibly for 1926, additions to the plant during the 18 months following June 30,1924, may be noted. Plaintiff claims, and we find no denial by defendants, and hence we find such additions to be: Going Value. Plaintiff claims $2,500,000. Defendants do not concede any specific amount, but in its rate-making orders the commission allowed $825,682. In its legal aspect the question is to he referred to comparatively recent decisions of the United States Supreme Court, those most relied upon by one side or the other being Des Moines Gas Co. v. Des Moines, 238 U. S. 153, 35 S. Ct. 811, 59 L. Ed. 1244; Galveston Electric Co. v. Galveston, 258 U. S. 388, 42 S. Ct. 351, 66 L. Ed. 678; Houston v. S. W. Bell Tel. Co., 259 U. S. 318, 42 S. Ct. 486, 66 L. Ed. 961; Denver v. Denver Union Water Co., 246 U. S. 178, 38 S. Ct. 278, 62 L. Ed. 649; Lincoln Gas & Electric Co. v. Lincoln, 250 U. S. 256, 39 S. Ct. 454, 63 L. Ed. 968; Georgia Ry. & Power Co. v. R. R. Com., 262 U. S. 625, 43 S. Ct. 680, 67 L. Ed. 1144; Ft. Smith v. So. W. Bell Tel. Co. (Dec. January 25, 1926), 270 U. S. 627, 46 S. Ct. 206, 70 L. Ed. 768, affirming, without opinion, lower court (D. C.) 294 F. 102. As we construe these cases, they do not sustain the broad contention of either party. From all of them we deduce the view that commissions charged with the duty of fixing reasonable rates, and courts charged with the responsibility of restraining confiscation, are to give consideration to all proper elements of actual value, and may not adopt going value in a broad, indefinite sense, or rejeet its substantial elements when they are shown to exist. Nor under the guise of going value should an element be again considered which has been given proper place under some other head. It is commonly known, and the testimony here well illustrates, that the term “going value” is highly elastic, and that at will it is used to embrace much or little. In a broad sense it may be understood to cover what is ordinarily referred to as “good will.” Probably out of deference to the express holding of the Supreme Court, plaintiff has not in terms claimed good will as an element of such value; but it is not clear that, in appraising going value, it puts aside all of the considerations covered by “good will,” even in the strict sense apparently intended by the Supreme Court. In weighing the subject, we are not to assume an irrational building program, but a normal development, whereby construction neither lags far behind nor wastefully anticipates remote possibilities, or even probabilities. To meet future probable ne'eds, however, basic structures may sometimes prudently be built at additional cost, to provide capacity for new installations of equipment as growth of business may from time to time require. There is merit, we think, in plaintiff’s contention that interest for construction should be projected beyond the construction period, strictly speaking, to cover the time necessarily elapsing before a plant of reasonable capacity can be brought into active service ; also something for maintenance and taxes. By this we do not mean that these factors are to be computed upon all unused capacity, or indefinitely upon units which are susceptible to uses other than those to which they are for the time being devoted. Although all of plaintiff’s property is not now being used to full capacity, it demands rates that will yield a fair net return on the entire value. Its dams may be adequate for additional generating installations, and its transmission lines may have capacity to carry additional current; but it deducts nothing from their total cost in the present set-up. Apparently the practice has prevailed throughout the entire history of operation and its propriety is not here challenged. As soon as any property has so far come into’ use that up to its entire value it may properly be and is considered as a factor in rate making, it ceases to be the basis for any further credits to going value for interest, taxes, or on other accounts. Such costs then become chargeable against operating revenue, and cannot also be capitalized. As to just when that time arrives in any given ease, judgments may differ; but the point is that both courses cannot be pursued in respect to the same item, resulting in a double charge. The state statutes require rates to be just and reasonable. If a rate structure is just and reasonable only upon the'assumption that the entire value of the existing plant constitutes the base, though not fully in use, then by hypothesis such rates become measurably unjust and unreasonable, if the surplus capacity is withdrawn to serve as the basis of building up going concern value, after such rates have been paid by consumers. So as to advertising and soliciting consumers, and generally attaching new business, the cost thereof might properly be assigned to capital investment; but it must also be conceded that there is no inherent reason why, with the consent of all parties, it might not be treated as an expense of operation, and in business generally it probably is so treated. With the approval or acquiescence of the commission, such apparently has been the practice of plaintiff. It now contends, however, that, with business so attached, the physical property is more valuable, and, regardless of how the accounts may have been kept, we must, for rate-making purposes, give full value to the plant as it stands. But the increment of value'was, in part at least, not contributed by or at the expense of the plaintiff, but by the public. It has no greater right to capitalize it than it has to capitalize the value of franchise and monopoly. Though the expense might have been treated as capital investment, rates were made to cover it, in part at least, as an expense of operation. It may be true, as counsel suggests, that the question is not one of mere accountancy, but involves the fundamental concept of value, and that intrinsically anything desirable has value, if normally it costs sacrifice to produce it, regardless of whether or not it entailed sacrifice in the particular ease; that a dollar has the same value when found or obtained by gift as when earned. But the conclusion implied in the general application of the principle here does not necessarily follow. There is also the principle that one has not the right to reap from another’s sowing. Plaintiff’s franchise and the monopoly it enjoys, which is the substantial equivalent of good will, are without doubt highly desirable and normally cost sacrifice; but it is not permitted to capitalize them. Georgia Ry. v. R. R. Com., 262 U. S. 625, 632, 43 S. Ct. 680; 67 L. Ed. 1144. They were provided by the public for public and not for private benefit. It is not merely a question of accounting. Having asked for and been granted a set of rates to cover the outlay, at least in part, as an expense of operation, and having gotten the benefit thereof, it is estopped from setting up an opposing theory, and now claiming such outlay as capital. “Of course,” says the court in Monroe G. & F. Co. v. Mich. P. U. C. (D. C.) 11 F.(2d) 319, 323, “the moment a commission has fixed the annual cost of getting business, and allowed it as an operating expense, and thereby pro tanto increased the per M [service] rate to which the company would otherwise have been restricted, that moment this cost, to that extent, ceases to be capitalizable or to have any effect on the rate base.” It may be true, as seems to have been the view of the court in that ease, that the principle does not ordinarily apply where there is no regulatory law. Clearly we think it inapplicable to the initial or formative period, when rates high enough to eover such expense would necessarily be 'excessive and are not charged. Accordingly we hold that, under the circumstances here shown, such expense should in part, but only in part, be regarded as a factor of going value. In a large measure like considerations are applicable to what plaintiff designates as “training organization.” Plaintiff does not at its own cost run a training school. Presumably it pays experienced employés, out of operating revenue, what, in the light of their skill and experience, their service is worth. No contract is shown obligating them to remain, and out of consideration for their training and experience to render service for less than it is worth. If it requires four inexperienced men to accomplish what three with experience can do, and if compensation is adjusted to efficiency, the result is the same. Kates to consumers are made to eover the cost, and, with the exception of the early formative period, they have been charged to and paid out of operating revenue, and such increment of value as may accrue is the normal fruitage of such revenue, and not of capital investment. We are unable to see how present economy of operation is an element of going concern value. It may be a consideration which should be weighed in ultimately determining what is a reasonable return. If we adopt, as a standard, reasonably prudent and economical operation, a suitable reward is thus provided for unusual competency and care, and a penalty falls upon extravagance and incom-peteney. Besides, the economy, such as there is, has been accomplished by means and agencies for which the consumers have paid, apd for their continuance are asked to continue to pay. . . So as to plaintiff’s credit. Ability to finance the enterprise under just conditions is but a normal attribute of a qualified utility corporation, and cannot be capitalized under the guise of going value., Given its franchise, protected against competition, and permitted to charge rates which will net a reasonable return upon the value of its properties and upon an adequate working capital, it is only doing what is to be expected when it promptly discharges its obligations and thus maintains its credit. Some consideration, we think, should be given to what is designated “co-ordinating and unifying physical properties,” for .the reasons explained by plaintiff’s manager. The real difficulty lies in the dearth, if not the absence, of evidence for an intelligent estimate. In a measure the item is subject to some of the considerations we have just discussed. When we turn to consider the ultimate question, in point of fact we are impressed with the inadequacy of dependable data upon which to base any finding by computation. Nor direct evidence plaintiff relies upon the “study” or prepared “memorandum” of its able manager. While he exhibits so-called computations under different theories, no one is free from controlling factors resting on nothing more substantial than opinion, if not pure assumption or conjecture. He has had a somewhat varied experience in the electrical business, but he has never given special consideration to the subject or conducted any experiments or made or recorded observations, or in any way made such investigation as would qualify his opinions as scientific inferences. Admittedly definite and dependable data touching some of the factors could have been recorded, from which fairly accurate calculations or estimates could be made; but for the most part this was not done, and we are left to reach a conclusion necessarily involving elements of great uncertainty. That his computations are not dependable is tacitly, if not expressly, conceded by plaintiff’s manager, for he declines to accept the result of any one of them, and expresses a general conclusion which in respect to the computations is measurably arbitrary. Nor are we greatly assisted by the citation of other instances where, ex necessitate, action was-taken upon data equally unsatisfactory. A conjecture is not greatly aided by repetition. ■ In the process of establishing a just rate base, the commission, in its order or findings of December 21, 1922, after allowing $322,-617.50 (we have allowed $400,000) for organization expenses, said: “But more is required for organization than incorporation fees and expenses. These are only part, of the framework. There must be a managing and operating-personnel; experience must be gained and records made, so that the needs of the customers can be understood, foreseen, and met. These are essential features in the task of getting going as a service concern; really a part of organization; but not in the limited sense in which the word is used by accountants. It is for the limited sense that the items of $206,430 and $117,-.187.50 were shown. The other part is considered in the study of business and property development, in which the ‘organization’ of the predecessor companies in its wider sense does have a part. * * * “From what appears in the record, it is clear that a large amount of money has been actually spent in making the successful service concern, and [also] upon, and because of, the nonoperative property. Our puzzle is to work out a fair allowance for the amount of such expenditure now represented in the service concern in its present successful operation. In other words, to find out how much of the expenditure not represented by tangible elements'has been energized in the service concern. “As will be noted from what is hereafter said about nonoperative property, a large portion of this expenditure had to be made because of these nonoperative properties, and for this we do not make an allowance in the rate base, for this represents only the service concern. Taking into consideration the benefits resulting to the public, the difficulties of reorganization, credit conditions, and the result achieved, we are of the opinion that there has been energized, in the way of property development, at least $518,622.10, and in the way of business development at least $305,-020.” (Volume 1, pp. 73, 75, 76.) While we may think the allowance too small, clearly there is here manifest no spirit of unfairness. Since then the enterprise has grown, and additions of considerable magnitude in the aggregate have been made to the physical. properties. Apparently, however, consistent with a prudent policy of development, these additions have been gradual, and have at no time greatly outstripped existing demand. That being the case, the interest and other charges upon finished, but unused, physical plant have not been, and should not be, great. Provision was made by the commission for ample reserve to be set aside out of operating revenue for upkeep, maintenance, and retirement, and for all operating expense, which provision experience has shown to be equal to if not in excess of the need in some respects. As already suggested, the current expense in recent years, at least, of attaching business, has been largely charged to and paid out of operating revenue, as was contemplated when the rates were established. In its set-up now plaintiff includes in annual operating expense an item on this account of over $35,000 (volume 1, p. 252), and in addition has grouped under “Miscellaneous” other items aggregating a very considerable sum which can be justified, if at ally only upon this account (volume 1, p.. 259). It would seem, therefore, that in the main, if the rates were fully compensatory as they were intended to be, plaintiff’s demand is now in part to capitalize expenditures which by agreement were not to constitute capital, and for which it has been reimbursed, and, if not fully compensatory, then in the most favorable view it seeks in effeet to capitalize losses incurred in operation. To conclude: We'recognize merit in most of the elements urged for our consideration. But in the main the accruals to going value are during the formative period of the enterprise and the early stages of development. Plaintiff’s experience and practice in making plant additions in recent years may be taken as illustrative and typical of a normal, economical construction program, after the enterprise is well on its way. The additions have been in response to demand, and have been but little in advance thereof. A comparatively short time intervenes between construction and compensated use, and upon completion the entire cost is added to the rate base. It is a natural growth. To meet accruing need, plaintiff made additions during the last six months of 1924 at a cost of $81,224, and it asks that this at once be added to the rate base; in 1925, $200,000, and the same procedure. Under such circumstances, the valid factors contributing to going value — rinterest, taxes, maintenance, cost of coordinating physical property, cost of attaching customers (the demand in part being preexistent), enlarging and training existing organization, and the other elements — must of necessity be comparatively small. In view of the dearth of dependable data, for us to attempt a specific computation would involve a measure of pretense. We can only exercise our best judgment, in the light of all the circumstances in evidence, also considering the opinion testimony, and doing so we estimate the capitalizable going value at $1,-500,000. „ Working Capital. Defendants’ engineer estimates a reasonable allowance for working capital to be $564,445. He makes the estimate upon the basis of the inventory of materials and supplies on hand June 30, 1924, and the amount of what he refers to as two months’ operating expenses. We do not find the specific items, and hence we are unable to determine what he regarded as a month’s operating expense or the amount of the material and supplies on hand at the time stated. The method employed, he testifies, is common practice for estimating working capital. It is not correct to say, as argued by plaintiff, that such a method ig-ñores consideration of certain items which it contends should properly constitute elements of working capital. It is what may be denominated a straight line or general estimate of all elements. Where, in the experience of engineers, such a rule has in the long run been found to be an approximately accurate measure, it may be resorted to in the absence of something better; but where, as here, there is direct evidence of specific needs for working capital, such a rule should be cheeked in the light of such evidence, if not rejected entirely. The plaintiff submits a tabulation (volume 1, p. 258) of what it contends are the items of needed working capital, amounting to $923,196, and it makes á claim for $950,-000. One of the items is $51,750 for “necessary bank balances.” Plaintiff necessarily carries accounts in numerous banks in the field of its operations, and we think the amount not unreasonable. In the same connection, however, we can see no substantial reason for allowing an additional $50,000 claimed for “contingencies.” This, of course, is just an estimate, and the witnesses were unable to make any very clear explanation of the necessity for it. In a small part it covers petty advances made to offieérs and agents of the company to cover traveling expenses, but in the main such expenses are chargeable as operating expense for the current month, whatever may be the practice as to their entry upon the books, and to that extent they are covered by another allowance shortly to be considered. We are unable to see why ordinary contingencies of operation cannot be taken care of out of operating revenue and the item of working capital to be allowed for that purpose, and in rare eases of extraordinary contingencies the $51,750 of bank balances may be temporarily resorted to. There is no contention that these bank balances must under no circumstances be impaired. Under the plaintiff’s set-up, it is not a borrower from the banks; hence is under no obligation, as is sometimes the case with a heavy borrower, at all times to maintain a substantial credit balance in its checking account. It is quite inconceivable that any unregulated business concern, carrying the balance we have allowed, would at the same time carry an additional balance of $50,000 to meet small contingencies that may now and then arise. Defendants concede that an allowance should be made for materials and supplies necessarily kept available for current needs, and therefore we. allow $203,259 claimed by plaintiff on that account. We also allow the amount claimed for prepaid insurance and rent, namely, $22,422, and shop operations, namely, $3,578. Considering the present status of the property and business of the company, and probable future, we regard $19,820 as excessive for “deferred valuation and rate expense.” Much of this work is done by regular employes, whose total compensation is charged and paid under other heads. We allow on that account $10,000. Plaintiff estimates two months’ operating expenses, exclusive of tax accruals, to be $187,463, and it contends for that amount. Just why it claims operating expense for-two months, rather than some other period, is not entirely clear. With the exception of its irrigation customers, it bills for service at the end of each month, and accounts become