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Mr* I* .E* Bennett • a v a ils 1 <* Advances for main extensions am deductible frets the capital base «* provided it appears such will be fully refunded over the. 10-year period, as provided in the role and regulation covering advances. 2 - If any part of an advance is not rtf undid in a X<U~ye&r period, on the basis of $0% of the gross revenue each year* then It smat fee ass's®*! that the business obtained is wiprofliable* (A $0% refund is very hi#}* Since the conclusion in that the satin extensions represented by the un-refuaded advances are meemootoal, the Water Gorapaty Should not fee further penalised fey deduct!on of that nsHrsfundad portion fros? the rate base, bat should be paraitted to earn on it, in order to recoup part of the loss* If the quest!cm Is raised, why sheald&H same recognition fee gives to the fact that present advances will fee smaller each year as refunds are made, the answer is, such is so but additional advances are received so, as a matter if fact, the advances each year are increasing, rather than lessening. The theory used in. support of the deduction is not too strong, in wy ©pitaifa* If such is discarded, then it appears that the full amount Is deductible on the cost concept. The value concept on construction advances would have practically no lihlihood of acceptance, in ray opinion* If the Sosapany paid interest on such advances, that would fee another matter, likewise, if we were discussing Hdonatione*, that would, be different too, and the Oes§>any,» poaitim would be a little stronger' in urging the inclusion of the items in the rate bass. The JQ% deduction is correct m the theory used. This would become slightly higher If $% be used, instead of W%* However, there is no such accuracy in the basic figures, and it is questionable whether any change should be made. As previously stated, practically all other changes suggested fey Hr, Hulaiser are being made, This has been a rather long review* It is hoped that, with the discussion, a fairly clear picture is had of the matter and that you and the Management can come to appropriate decisions.