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5 Borrnally, where straight 11 ns depreciation accounting is employed, that capital which ia returned through animal depreciation charges to operating expenses is deducted in arriving at the rate base. In this ease, it night, with much force be claimed that, inasmuch as tbs amortisation charges were actually never earned, the Capital base should net ba decreased by such amounts* You know, from a legal standpoint (much better than I do), that this raises the question of past g alns and losses. To urge that pest losses may be recouped from future retea is a very questionable position to take, in my opinion. It has many ramifications, it the \ ' present time, this Is becoming a very live question before the California Commission in respect to over-accruals of depreciation reserves. Certain members of the Staff would so treat the over-accrual as to lessen future depreciation expenses chargeable to operation - only another way of reaching back to recoup past gain* for the future - in effect, retroactive rate making. You will recall that, in the 1926 Sew York Telephone Case, Justice Butler, in writing the Decision for the ®.S*Supreme Court, definitely ruled against any such prattles. In more recent Supreme Court cases, such as the Illinois Sell and the Hope natural Cas, it is probably correct to say that one cannot be to© certain whether the Hew York Telephone pronouncement is still the law of the land. In any event, I woull hesitate to use past losses as the basis for not deducting the amortisation accrual, other than an incldantal reason. The California Commission, t© the best of my knowledge, has permitted the utility to continue to earn on the amortised portion of its defense inveetmest, provided such properties were used end useful. It