upr000278 99

WM, R Sep 6 ,\,;j September 1, 1950 Mr. I* £* Bennett, General Solicitor, Union Pacific Railroad Company, k22 West Sixth Street, loa Angeles lU* California. ?tla 80 “ 5 Bear Mr. Bennett s la accordance with your letter of August 1?, 19$0, and our discussion In toe Angeles following that date, 1 have reviewed Mr* W, H. Hulsisser’s communication of August 11, 1900, covering the rough draft of sy report on the Water System at las Vegas. I have endeavored to incorporate the changes suggested as, for the most part, they bring about elarily and improvement In the text. Soto changes In footage of distribution sain Kid fixed capital figures supplied under date of July 16, 1950, were not available when the draft was submitted as of June 15th. ^ While the dollar differences are very email and no change in the end results will result, it is believed desirable to make the changes and re-corapute the earnings so that the basic figures on the report will tie in with the capital figures la the Omaha office* There was one sisable error, too, in ay calculations that Mr* Kulsiaer caught. As this occurred in the Present-Bay Cost basis, it will not change the Increase selected, as such Increase did not reflect the higher amount that would arise from the present-day price level. Item 3* (Mr* Hulsiser’s letter) Directing our attention to eost of wholesale water billing (page 2?) and to the summary analysis of the component costs as developed in the report, Mr* Kulsiaer raises a question as to the adequacy of the **ad justed cost of depreciation.®, in the amount of $10,]tC6» This results g| in an average rate of l»hOSS and compares with 1*80$ developed on the original cost basis (Table J). Ae you will recall, the report (page 1) develops these capital bases, namely: I - Recorded Costs II - Original Coats III - Present-Day Costs As to the annual depreciation expense for both the producing and the Water Company, the actual depreciation rates, as used in the Omaha office, have consistently been used In the development of earnings and return on the Recorded Cost basis. For the other two, I have used sy own estimates, as set forth in detail in the Appendix of the report* These arc predicated on shorter live® and result in higher rates * SEP 7 1950 \ L* C * C .