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upr000158 66

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upr000158-066
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    September 29, 1950 Mr. Roy A. Wehe 111 Sutter Building San Prancisco 4» Calif. Pear Roy: At the time we sent the rough draft of your report to Mr. Hulstzer In June of this year, we sent him a draft of a contract between the Water Company and the Railroad Company superseding the old contract uhder which the Railroad Company transports water from the production fields to the distribution system of the Water Company. X do not believe that X sent you a copy of this contract* With one or two exceptions, it appeared to be satisfactory to Mr. Hulsizer although X do not believe he gave much consideration to some of the questions which are pre­sented in the making Of a new contract* % have revised the draft which I originally sent to Mr. Hulsizer for consideration and after obtaining the benefit of your comments intend to recommend to Mr* Reinhardt that he transmit it immediately for execution* I think it is important that at the time we appear be­fore the Commission there should be in existence an agreement be­tween the Water Company and the Railroad Company whereby the Water Company agrees to pay to the Railroad Company the increased costs of water production which your study has shewn to exist. Also, X think it is desirable that the contract under which the Water Company will pay the Railroad Company for water shall conform as closely as possible with the elements of costs shown by your study* I have, therefore, had your study in mind in making the new draft, a copy of mhloh X enclose* The first problem is that the Water Company owns practi­cally all the water rights whereas your study shows the water right value to be in the rate base of the Railroad Company* The old contraot between the Companies, which is in the hands of the Commission, recites that the Water Company owns most of the water produced from the water bearing lands, and the draft whioh X en­close also shows that the Water Company owns the right to put to beneficial use most of the water developed in the springs and Railroad wells* Xn the former rate case of the LVL&WCo, the Public