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COPY jjjfc ROY A. WEHS - .4 Cons til ting Engineer One Eleven Sutter Building San Franelseo 4> California September 1, 1950 Mr. E, E. Bennett, General Solicitor, Onion Pacific Railroad Company, 422 West sixth Street, Los Angeles 14, California File 8 0 - 5 Bear Mr. Bennett: In aeeordance with, your letter of August 17, 1950, and our diseussion in Los Angeles following that date, I have reviewed Mr. W. H* Hulsizer*s comsumioation of August 11, 1950, covering the rough draft of ay report on the Water System at Las Vegas. I have endeavored to incorporate the changes suggested as, for the most part, they bring about clarify and improvement In the text. Some changes In footage of distribution main and fixed capital figures supplied under date of July IS, 1950, were not available when the draft was submitted as of June 15th. While the dollar differences are very small and no change in the end results will result, it is believed desirable to make the changes and re-compute the earnings so that the basic figures on the report will tie In with the capital figures In the Omaha office. There was one siz­able error, too, in my calculations that Mr. Hulsizer 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. Hulsizer’s letter) Directing our attention to cost of wholesale water billing {page 2?) and to the summary analysis of the component costs as developed in the report, Mr. Hulaizer raises a question as to the adequacy of the «adjusted cost of depreciation", in the amount of #10,406. This results In an average rate of 1*40% and compares with 1.80$ developed on the original cost basis {fable J)» -f As you will recall, the report (page 1) develops these capital bases, namely: 1 - Recorded Costs II - Original Costs III - Present-Day Costs v 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 my own estimates, as set forth In detail in the Appendix of the report. These are predicated on shorter lives and result in higher rates.