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sion regards as serious omission the failure of the company to produce the records, although requested to do so.'

In Matter of Cripple Creek Water Co., P. U. R. 1916 C, 788, the Colorado Commission held that as it was able to ascertain the true original cost, that the valuations made by the engineers of the company and the Commission should receive small consideration at its hands.

In Smyth v. Ames, 169 U. S. 466, 547, the original cost of construction is one of the items mentioned which should be taken into consideration in determining the reasonableness of rates. The Legislature of the State of New York has embodied into statute law the principle declared by the Supreme Court of the United States.

In San Diego Water Co. v. San Diego, 118 Cal. 556, the court says: "Nor would it, on the other hand, be just to the consumers to require them to pay an enhanced price for the water, on the ground that it would now cost more to construct similar works. Such a contingency may well happen, but to allow an increase of rates for such reason would be to allow the water company to make a profit, not as a reward for its expenditures and services but for the fortuitous occurrence of a rise in the price of material or labor. The law does not intend that this business shall be a speculation in which the water company or the consumers shall respectively win or lose upon the casting of a die, or upon the equally impredictable fluctuations of the markets. For the money which the company had expended for the public benefit it is to receive a reasonable and no more than a reasonable reward. It is to be paid according to what it has done and not according to what others might conceivably do. In effect, a bargain between the company and the public was made when the works were constructed and this matter is to be determined according to the state of things at that time."

In Antioch v. Pacific Gas & Electric Company (1914), 5 Cal. R. C. R. 19, 33, cited L. R. A. 1916F Notes, page 615, Thielen, Commissioner, said: "The mind of a practical man instinctively turns for first guidance to the simple question of the

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amount of money which has been honestly and wisely invested. While it is of course evident that there may be many circumstances under which the application of this basis alone would not be equitable and that qualifications must be made as justice and equity require, it would seem to the lay mind that a rate fixing authority will not go far wrong if in determining the basis for rates it first ascertain the amount of money which the utility has invested honestly and with a fair degree of wisdom in the business which it is conducting for and on behalf of the public."

The Indiana Public Service Commission, in Commercial Club v. Citizens Gas & Fuel Company, 1916 E, P. U. R. p. 1, holds that the actual cost of the plant while not actually controlling nevertheless would be very valuable evidence in determining present worth.

In Wilkesbarre v. Spring Brook Water Supply Co., 4 Lack. Leg. News (Pa.), 367, it is held that the primary basis of any calculation as to the value of a water plant must be the money actually invested by the owners.

It is unnecessary further to multiply citations. Even in those cases where reconstruction cost is deemed to be a proper basis upon which to determine value in a rate case, great stress is laid upon the original cost as an important means by which to determine present value. Here the United Company absolutely refused access to records which undoubtedly would have given the true cost of property which had been turned over to the Iroquois Company at an alleged valuation of $5,580,505, more than one-half of the authorized capital of the Iroquois Company, and the refusal was based not upon the reason that the books did not show such cost but upon the reason that the stipulation did not cover the request to examine the books. The United Company was willing to show the actual cost provided the Commission and the city were willing to accept such evidence as the company was willing to offer.

The stipulation plainly covered the point in question. The only condition imposed to make the stipulation operative is that the reasonableness of the price paid for gas by the Iroquois Com

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pany to the United Company is in issue. That this price is an issue is admitted by the Iroquois Company when it proceeds to offer much evidence upon that disputed point. When the question noted is in issue, then the books, papers, records, and physical property of the United Company are as much open to the inspection of the Commission as though the company and its affairs were under the jurisdiction of the Commission. If it had been the intention to limit the examination solely to the question of the reasonableness of the price of gas sold to the Iroquois Company by the United Company, then the able and astute counsel who acted for the Iroquois Company in the 1912 proceeding would have seen to it that the stipulation clearly expressed that intention.

If there can be any doubt as to the true meaning of the instrument in question it must be interpreted most favorably for the public.

People v. B. R. R. Co., 126 N. Y. 29, was an action to have declared forfeited for non-user certain franchises granted to the company by an act of the Legislature. The court says (p. 37): "Words and phrases which are ambiguous, or admit of different meanings, are to receive, in such cases, that construction which is most favorable to the public. * The defendant cannot claim a liberal or enlarged construction of the act to shield itself against a forfeiture alleged to have been voluntarily incurred."

*

*

Can the Iroquois Company now claim an enlarged or liberal construction of a stipulation voluntarily made?

In Sprague v. Rochester, 159 N. Y. 20, 26, the court says: "A statute which creates a new rule, unknown to the common law, for the protection of a city against its own citizens, should be construed strictly against the city and liberally in favor of the citizen."

In Coosan Mining Co. v. South Carolina, 144 U. S. 550, 562, the court, in speaking of the legislative grants of property, franchises, and privileges, says: "Statutory grants of that character are to be construed strictly in favor of the public;" and again, "This principle," it has been said, " is a wise one, as it

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serves to defeat any purpose concealed by the skillful use of terms to accomplish something not apparent on the face of the act, and thus sanctions only open dealing with legislative bodies."

In this case, the State of New York, by the force of its statutes through the body designated for that purpose, granted certain valuable rights and privileges to the Iroquois Company by an order based upon certain conditions, one of which was the acceptance of the stipulation in question. The parties to whom the stipulation applied voluntarily accepted it. Can any argument which applies to the interpretation of a grant made directly by legislative act, not be applied to the stipulation in question? We have called attention to the fact that the figures presented to the Commission as the value of the Iroquois Company are according to the claim of the company based entirely upon reproduction cost. At one point counsel for the company said: "our case has thus far proceeded upon the theory of the reproduction cost and that is the theory we are going to continue upon." The gentleman who made the figures for the company is a consulting engineer who had had no practical experience in the natural gas business upon which to base his conclusions. For a year and a half he represented the State Tax Commission as appraiser upon special franchises. For nearly a year he represented the Public Service Commission for the First District of New York State. While we do not criticize his ability as an engineer, it is quite apparent that he had no experience which would make his opinion as to the value of the component parts of a natural gas plant of any particular value. He had not made an examination of the plant, but his knowledge was obtained entirely from the books of the company and from information derived from others. His testimony was of the most theoretical character. It would appear from his testimony that he did not in all cases make use of the experience which he had previously had. It appeared that some of the pipe lines had been laid for over thirty years. He testified that in his work for the State Tax Commission he had to do with the question of depreciation of iron pipe that had been laid in the highway, and that he always allowed

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from one and one-half to two per cent for depreciation, the amount depending upon the size of the pipe. He added, however, with regard to his work in this case, "We have made no allowance for theoretical depreciation in this case." This witness added 10 per cent of the total reproduction cost of the physical plant, as figured by him, for a "going value." The amount added is $1,482,888.07. The witness stated he had assumed 10 per cent of the total reproduction value and added it as a part of the capital account, and further stated that this is in accordance with the best practice as laid down by the authorities. The following is a part of the testimony of the expert: "Q. You have taken what you consider would be the reproduction cost of the physical plant? A. In existence today. Q. And then added 10 per cent to that for going value? A. Yes, sir. Q. How does that give you your value? A. Well, the only other way of figuring it would be to go back into the operating records, way back into 1886, and figure all the actual expenses. Q. The only other way would be to get the actual expense of building up your business? A. Of building up our business. Q. Now then, this is really a guess isn't it, this 10 per cent? A. This is a guess; oh, yes." And later this testimony was given by the witness: "Q. Did you know that this Iroquois Gas Company was formed by the consolidation or union of several other companies? A. Yes, sir. Q. Do you know anything about the history of those companies? A. I have not tried to investigate those at all. The companies are The companies are- I have listed here in the first part of this report. Q. Then as a matter of fact not having the facts which you should have upon which to arrive at the going value with any reasonable degree of accuracy, you have made the best guess you could under the circumstances? A. I have made the best guess I could under the circumstances. Ten per cent is the usual allowance."

The Commission is unaware of any rule which allows a guess to take the place of competent evidence which may be difficult to obtain or which may require considerable labor for its production.