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are expending large sums of money in developing additional hydroelectric generating plants along the Pit River in Shasta County. During the past year it has placed in operation its Pit River Plant No. 1 with an installed capacity of 93,834 horsepower. It has undertaken the construction of its Pit River Power House No. 3 which, when completed, will have an installed capacity of more than 100,000 horsepower.

Southern California Edison Company, during the year, was authorized to sell $15,417,000 of bonds in addition to the amount of common stock heretofore authorized, which has been sold during the same time. The company has throughout the year continued work on its Big Creek development. Its Big Creek Power House No. 3 was placed in operation during the latter part of 1923. This plant has a generating capacity of 100,000 horsepower.

The Great Western Power Company of California, which during 1922 completed its initial Caribou development, was authorized to issue $1,000,000 of 7 per cent preferred stock to take care of ordinary expenditures for additions and betterments and for paying in part the cost of its Valona-Golden Gate transmission line and its Golden Gate substation near Albany, Contra Costa County, and at a third unit to its Caribou plant.

Western States Gas and Electric Company was authorized to issue $500,000 of preferred stock and $267,000 of bonds to finance the cost of additions and betterments. The company through its subsidiary, El Dorado Power Company, is engaged in constructing a new hydro-electric plant on the American River, which, when completed, will have an ultimate capacity of 100,000 horsepower. Additional water reserves developed will also be available for the operation of the existing plant which may be enlarged to a capacity of approximately 56,000 horsepower.

Of the other large gas and electric utilities, San Joaquin Light and Power Corporation was authorized to issue $2,433,000 of bonds; San Diego Consolidated Gas and Electric Company $1,768,000 of stock and $1,438,000 of bonds; Los Angeles Gas and Electric Corporation, $3,000,000 of stock and $1,000,000 of bonds; Southern California Gas Company, $1,000,000 of stock and $4,500,000 of bonds.

The Commission authorized The Western Pacific Railroad Company to issue $5,500,000 of bonds to pay for additional properties. Subsequently it was decided not to issue these bonds and the Commission in a later proceeding authorized the company to issue in lieu of the bonds $5,600,000 of 52 per cent serial equipment trust certificates, to pay for 2000 30-ton steel refrigerator cars, 100 steel automobile cars, 6 freight locomotives, 100 logging cars, 20 passenger cars, 8 dining cars and 20 baggage cars.

Outer Harbor Dock and Wharf Company, which owns terminal properties in Los Angeles Harbor, was authorized to issue $4,850,000 of stock for development purposes.

REFUNDING.

In the preceding annual report attention was called to the refunding of high interest-bearing securities through the issue of low interestbearing securities. The amount of securities issued for refunding purposes during the twelve months ending June 30, 1922, amounted to $19,075,793; for the twelve months ending June 30, 1923, the Commission authorized

year the Commission authorized Spring Valley Water Company to issue $22,000,000 of 20-year 5 per cent bonds to refund $750,000 of 5 per cent notes due February 1, 1923, $2,500,000 of 6 per cent notes due March 1, 1923, and $17,859,000 of 4 per cent general mortgage bonds due December 1, 1923.

The Commission also authorized Western States Gas and Electric Company to issue $5,000,000 of 6 per cent notes due October 1, 1937, and to use the proceeds to refund $1,199,000 of 612 per cent collateral trust notes due August 1, 1923, and $2,668,000 of 6 per cent notes due February 1, 1927.

Southern California Edison Company was authorized to issue $9,500,000 of its new 7 per cent cumulative nonparticipating preferred stock for the purpose of refunding the outstanding second preferred stock amounting to $12,059,000.

COLLATERAL.

Recent mortgages executed by some of the utilities contained provisions by which the companies covenant not to sell any more underlying bonds but to deposit such bonds when and as issued with the trustees under the new mortgages. This form of financing accounts for all of the $14,670,000 of bonds authorized to be deposited as collateral during the year ending June 30, 1923.

REORGANIZATION.

As in the preceding year, there were no large public utility reorganizations. San Diego Electric Railway was authorized to acquire the properties of Point Loma Railroad; Coast Counties Gas and Electric Company to acquire the properties of Contra Costa Gas Company; Pacific Gas and Electric Company to purchase the outstanding stock of California Telephone and Light Company; Coast Valleys Gas and Electric Company to acquire the properties of Del Monte Power Company. The amounts of stock and bonds authorized by the Commission for these purposes aggregated $1,715,803.91.

COMMISSION'S DECISIONS.

The Commission's decisions authorizing the issue of stock, bonds, notes and other evidences of indebtedness are published in pamphlet form and also in volumes entitled "Opinions and Orders of the Railroad Commission of California." Attention is called to a few of these decisions.

REIMBURSEMENT OF TREASURY.

In application No. 8452, Southern Counties Gas Company of California applied for permission to issue $750,000 of its common capital stock to reimburse its treasury because of surplus earnings invested in properties. The order of the Commission in commenting upon this request contains the following language:

An order authorizing applicant to issue stock to reimburse its treasury requires a determination of the sources from which applicant has obtained the moneys expended. Applicant's balance sheet as of October 31, 1922, shows a surplus of $938,740.37, an amount in excess of the $750,000 of stock which it desires to issue. The $938,740.37 has been invested in property. But an analysis of applicant's financial statements shows that the surplus was built up in part because prior to 1918 applicant included very small amounts in its operating expenses on account of depreciation. Had applicant made proper allowance in its operating expenses for depreciation, it would not

have the surplus reported on October 31, 1922. The Commission's engineering department has reviewed applicant's "Exhibit 4" and reports that applicant, as of December 31, 1921, should have had in its reserve for accrued depreciation $1,160,682.01 instead of $616,010.97 as reported by applicant. It therefore appears that applicant, assuming its depreciation allowance during 1922 to have been correct, had on October 31, 1922, really a surplus of only $385,069.29 instead of $938,740.37. Applicant should transfer from its surplus for accrued depreciation a sum sufficient to bring its reserve for accrued depreciation as of December 31, 1921, up to $1,160,682.01. The reserve for accrued depreciation should be built up by the transfer of the necessary amount from applicant's accumulated surplus rather than from future earnings. On the condition that the transfer is made, the Commission will permit applicant to issue $375,000 of stock to reimburse its treasury and distribute such stock as a dividend.

REFUNDING of funded DEBT THROUGH ISSUE OF STOCK.

By Decision No. 11061, dated October 5, 1922, the Commission authorized East Bay Water Company to issue and sell $184,363 of Class "A" 6 per cent preferred stock and to use the proceeds to reimburse its treasury for monies used in making sinking fund payments. The Commission's decision, written by Commissioner Martin, recites that in a former decision the Commission declared that "there was no objection to the refunding of funded debt through the issue of stock, provided the company's properties were reasonably capitalized. If the capitalization is in excess of the reasonable value of the properties, surplus earnings should be used to pay funded debt and no stock issued to reimburse the treasury because such earnings were used to meet sinking fund requirements."

SELLING PRICE OF BONDS.

In Application No. 7942, Bay Transport Company, a corporation, operating steamers, barges and tugs as a common carrier on San Francisco Bay, applied for permission to issue and sell at 90 $175,000 of 10-year 7 per cent bonds. The Commission's opinion comments on the proposed price as follows:

While a company operating under circumstances, such as applicant, may not be able to sell its bonds on a 6 per cent basis, nevertheless I do not believe that this Commission should, under present money market conditions, authorize the sale of a 10-year 7 per cent bond, callable at 110, at a price of not less than 90 and accrued interest. Unless applicant can sell its bonds on a basis of 8 per cent or better, I do not believe that its present indebtedness should be refunded through the sale of bonds. The order herein will require applicant to sell its 7 per cent bonds for cash at not less than 93.2 per cent of face value and accrued interest.

DEFERRED PAYMENTS ON SALE OF STOCK.

During the year Pittsburg-Sacramento Auto Ferry, a corporation, newly organized for the purpose of operating an auto ferry between Pittsburg and the shore of Solano County, applied for permission to issue and sell stock, it being the intention of the company to sell the stock upon the installment plan and accept notes for deferred payments. The Commission, however, did not look with favor upon the company accepting notes for such deferred payments and comment was made in the opinion and order as follows:

The company expects that a portion of its stock will be sold under stock subscription agreements providing for payment in installments. At the hearing reference was made of applicant accepting notes for deferred payments. The Commiss on does not look with favor on the company's requiring notes for balances due on stock subscriptions. If the subscriber is unable to make full cash payment, the subscription agreement will show the balance due and there should be no necessity to make him give a note for the remainder. It is, of course, understood that no stock shall be delivered

CAPITALIZATION OF NONPUBLIC UTILITY PROPERTIES.

The Commission in Application No. 8532 was asked to make an order authorizing Gray Warchouse Company to issue $25,300 of stock for the purpose of acquiring nonpublic utility property and business. Although the record in the case showed that the company did not intend to engage in public utility business, there was a possibility that at some future time its operations might be extended and come under the jurisdiction of the Railroad Commission. For this reason an application was filed here. The Commission in making its order granted permission to issue the stock but required the company to file for approval a stipulation authorized by applicant's board of directors and declared that it, its successors and assigns would never urge or ask the Railroad Commission or other public body having jurisdiction to include in a rate base such an amount of the stock authorized as may be used to acquire or as may be represented by nonpublic utility properties.

CAPITALIZATION OF GOOD-WILL.

Upon several occasions during the past year the Commission has been called upon to authorize the issue of stock against good-will and other intangible values. The Commission, however, has firmly adhered to the policy of refusing to permit the issue of stock against good-will or going concern value.

In Application No. 8614 the Dillingham Transportation Company applied for permission to issue $10,000 of stock to its incorporators for good-will and going concern value. In support of this request it alleged that its service was started during the early part of 1918 with one passenger stage, that patronage at first was small and the operations unprofitable. From time to time the lines and service were extended, new operative rights secured, extensive advertising was done, traffic arrangements were made with other carriers and the business was built up until at present there are in use twelve stages. While the Commission denied the request of applicant to issue stock against good-will it recognized that the company's incorporators incurred some expense in establishing the business and accordingly authorized the issue of $3,000 of stock on account of promotion expenses.

ISSUE OF BONDS BY A UTILITY OPERATING IN NEVADA.

Winnemucca Water and Light Company, a public utility, supplying light, water and power in Winnemucca, Nevada, during the year filed an application with this Commission for permission to issue and sell $115,000 of bonds. The reason for entertaining this application is shown in the following excerpt from the Commission's decision:

Applicant's plants and properties are all located in the State of Nevada. The Railroad Commission has made no appraisal of applicant's properties, and it has no jurisdiction over applicant's rates or service. The only reason why the Railroad Commission has received this application is the fact that applicant is organized under the laws of the State of California. Inasmuch as by section 52 of the Public Utilities Act of this state, all stocks, bonds, notes or other evidences of indebtedness issued "by any public utility shall be void," unless authorized by this Commission, we have considered this application and in order to remove any possible doubt as to the validity of the bonds, we now enter an order authorizing their issue.

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CHAPTER V.

FINANCIAL CONDITION OF UTILITIES.

During the year ending December 31, 1922, the operating revenues of steam railroads, electric railways, gas, electric, water, telephone and telegraph companies, carriers by water, wharfingers and warehousemen, and auto stages, filing annual reports with this Commission, totaled $818,244,553.28, as compared with $792,492,772.85, for the year ending December 31, 1921; the increase amounting to $25,751,780.43. During the same period operating expenses increased $2,660,103.61, being $602,976,460.30 in 1922 and $600,316,356.69 in 1921. The net operating revenues increased $23,091,676.82, the total figure for the year 1922 being $215,268,092.98. In 1920 the net operating revenues were reported as $192,176,416.16; in 1919 $165,276,767.74; in 1918 $156,903,892.79. The operating revenues derived from auto stage lines in 1922 are reported at $15,549,349.94, operating expenses as $14,322,725.34 and net operating revenue as $1,226,624.60. Of the gross revenues $8,917,563.13 was obtained from passenger business, $4,454,409.25 from freight business and $2,177,377.56 from express, baggage, mail and other business. These figures are obtained from all the reports filed by auto stage companies with the Commission for the year 1922, whereas those obtained in the reports for the year 1921 were obtained from companies having operating revenues in excess of $20,000 only.

Steam railroads for the calendar year 1922 report operating revenues of $436,523,892.96 and operating expenses of $317,780,349.57, leaving net operating revenue of $118,743,543.39, as compared with net revenues in 1921 of $115,496,439.67. These figures, however, include total earnings of The Atchison, Topeka and Santa Fe Railway Company, Los Angeles and Salt Lake Railway Company, Southern Pacific Company, The Western Pacific Railroad Company, Nevada-California-Oregon Railway Company and Tonopah and Tidewater Railroad Company, all of which companies are engaged in interstate as well as intrastate business. The reports show the gross revenues from business within California as $173,932,697.33; expenses $127,210,188.76; and net operating revenues $46,722,508.57, as compared with $42,199,000 in 1921 and $29,945,000 in 1920.

Electric railway companies report operating revenues of $55,238,182.57, operating expenses of $41,037,553.27 and net operating revenues as $14,200,269.30. Income from auxiliary and non-operating sources is reported at $889,455.58. After paying taxes and interest and after making other deductions from income the companies report $2,343,668.38 available for dividends and surplus.

Water companies for 1922 report operating revenues of $14,867,147.17 in 1922 as compared with $13,310,699.10 in 1921. Their net operating

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