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Mr. K* 1. Bennett involved in the L«A*leS.UE,E. Company. this latter setter arises, ia part, cm Construction Advenes* m the X»?»f*4flf« Company# For presentation before a regulatory Commission la substantiation of costs involved in delivery of water, it appears to s» to be most inadvisa­ble to use a method that is in direct conflict with universal practice and a long line of court decisions. If the Management desires to use some different method for internal billing, as a matter of Company practice and policy, that is presumably its business. However, in these days when book pasties is looked upon as very ijqjortant, even such is questionable, in wgr opinion* Item — page 36* (Hr* Hulsissr'a letter) ihe ’&ndling and/or treatment of owtomer advances in aid of c<m»traction in the report is far from a eoraplstsly satisfactory solution. It was a means of approach, however, to attempt to salvage something,for it is ay firm cmrictim that a full deduction is not warranted* Here, again, one most orient his thinking to pressat-day Commission and Court treatments of these mattes* We asst squarely the different rate making philosophies, as eiabodled is the Sccst concept'**1 as opposed t© the "value concept". Bressntly, we are in the “cost concept** phase of rate making - i*©., what is the cost burden loosed upon the owners of the utility in furnishing the service - and not on the value of the facilities presently employed la that service. Getting back to advances made by customers or real estate subdividers for main extensions, the cost theory merely says - these dollars of invest­ment that have been advanced without oast or interest payment to the Utility, must fee deducted from the capital or rate base - otherwise, the customer and/or the subdivider is made to pay a return m capita! advanced. Such capital costs the Utility no amount and becomes a part of the rate base as the Utility makes refunds, as prwided in the extension rule. the fact that the advance., in most instances, was made by the real estate subdivider, rather than the ultimate purchaser of the bom* and thus the actual water customer, would have no bearing on the treatment, I am reasonably certain* Further check on the matter of the 10$ overhead shows that Mr# Hulslaer is correct, in that several of the large extensions were put in by the subdividers th«s©lves and the Water Company did not assess the overhead charge# Mr* is of the opinion that, «f the un-refanded advances now on the books, possibly %% rather than 1Q$ would be a more accurate figure t© we* However, most normal extensions carry the 10$ charge. The method used and the reason supporting it is thiss