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2 Results of Operation Utilizing Adverse Factors (Year 1061) Estimated increases in Gross Revenue at the four following rates of return along with comparisons as per report on Original Cost Basis are here set forth} 5-5/4# 6#_______6& (a) Gross Revenue Deficiency at 6^# as per Report Original Cost Basis - Table P, Sheet 2 #04,418 #94,418 #94,418 #94,418 (b) Gross Revenue Defi­ciency using adverse factors at the rates of return shown £4,415 £9,086 55,758 58,451 (c) Possible loss in es­timated increase in Gross Revenue #70,005 #65,552 #60,600 #55,987 If, Instead of comparing the gross revenue deficiency developed under adverse factors (line (b)) with the #94,418 estimate predicated on a 6^# return, a return of 6# is used (Original Cost Basis - Table P, Sheet 2), a figure of #88,047 is developed* Thus each of the losses shown under line (c) are reduced #6,571 (#94,418 m #88,047). This means that the proposed rates, which are estimat­ed to produce approximately #90,000, might be reduced to raise a minimum of #24,415 at and #38,431 at 6 -1/4#. The minimum results that are produced utilising all the adverse factors are much too severe in my opinion. Wy own judgment is that the Commission might well award a gross revenue increase in the neighborhood of #65,000* Such is predicated on the following assumptions: Rate Base Adverse Rate Base - Table I this memo Add both (a) Land as per books (b) Retirement Accounting to Original Cost (o) Balance of Defense Plant Amortization (d) Water Rights Use #1,516,000 #1,028,000 15,665 105,474 141,996 25,000 $T,'STi,lS5 Rate Base