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Los Angeles -/ June 3 th, Mr. G. F. Ashby.: f* &, U. JUN 10 1842 Referring to jour letter of May 9th with attachment of May 7th fro® Mr. Hulsiser, in which latter letter recommen­dation is made for the transfer to LYL&W Co. of the Railroad Co.*a investment in the Las Vegas water supply system. After conference with Messrs. Guild, Bennett and Bracken we arrived at the following conclusions, reference being made to the paragraphs as numbered in Mr. Hulsixer's letter: 1 . It seems probable that the percentage taken by the Water Co. will increase rather than diminish. 3. Onion Pacific charges against the Water Co. have been the subject of criticism on part of the Com­mission, which would be avoided by the transfer. Depreciation could then be determined as sug­gested by Mr. Hulsiser by applying appropriate charges to the several features of the property, and would be properly included in Water Co. Operating Expenses and accepted by the Commission. 4. Unquestionably under present conditions there is a distinct appearance of double profit which would be avoided by the transfer. 5 and 6 . The Railroad Co. owns a well on the Shop grounds at Las Vegas, which could be operated at small cost by pumping, using railroad-generated power. Water for most of the Railroad's needs could no doubt be thus developed at less cost than the wholesale rate that would be charged by the Water Co. Such procedure would deprive the Railroad of a sub­stantial operating charge, but would at the same time, for both income tax and rate making purposes, improve the Water Co.'s position. Tabulation under Item 6 shows an estimated net return upon combined investment of £.6 l^. A net return in this amount might attract unfavorable com­ment from the Commission, and it seems we could better protect the Water Co.'s rate structure if the net return upon investment does not greatly exceed $%. The tabulation is an estimate based upon consolidated <1 )