TABLE III.-continued. Summary of Income Accounts, Omro Electric Light Company. The annual commercial revenues increased $740 from 1911 to 1913, but a falling away of these revenues in 1914 made the net increase for the entire period only about $420. The street lighting earnings increased $140 from 1911 to 1914, so that the increase in total operating revenues amounted to $560. The operating expenses increased at a more rapid rate, and consequently have resulted in a deficit of $108 for the year ending June 30, 1914. The increase in operating expenses became most noticeable in 1912, when certain salary increases took place. In the face of the increase in operating expenses, the net income has been sufficient to furnish substantial dividends except for the last year when the expenses continued to grow in spite of a decrease in the revenues. The petitioners took up, at the hearing, the subject of wages and salaries, and endeavored to establish that the amount paid by the respondent is more than the business requires. Concerning this contention, it may be said that the manner in which the expenses are divided between management and other accounts is not so very material to the public, but that the total cost of service must be maintained within reasonable limits. A rule that the actual expenditures should be controlling, in fixing rates, regardless of what they may be, could not be made to stand, for reasons too obvious to require mention. Costs, therefore, must be examined and tested. If wages and salaries are unusually high, it is not unreasonable to expect that a consequent greater efficiency will reduce the expenses in other directions. But, if unusually high wages and salaries are not exceptionally productive, they must be considered partially as a disposition of the net income. One way of making a test of the expenses, at least in the aggregate, is to compare them with expenses of utilities operated under quite similar conditions. Such a comparison will be shown a little later. Another point that was dwelt upon was the fact that some of the expenditures which should have been charged to the property and plant account were improperly charged to operating accounts, so that the annual expense of carrying on the business appears to be greater than it actually is. This improper method of dealing with some of the expenditures, of course, had also the effect of keeping down the book value of the plant, and we have concluded, therefore, that the difference between the appraised value and book value is accounted for, at least partially, by this fact. In dealing with the value of the plant, the conclusion was that the book account should not be considered binding upon the company in fixing a fair value, other evidence pointing quite conclusively to a higher value. The effect of this is to allow, as capital investment, some of the expenditures classified by respondent as an operating expense. As it is clearly unreasonable to allow the expenditures in both capital and operating accounts, some method must be adopted by which duplication can be avoided. While an audit of the books would probably disclose quite fully the proper division between investment and operation, it is not very apparent that the matter is of sufficient importance, in this case, to justify the considerable expense thereof. Another method has already been suggested; namely, a comparison of operating expenses of this and other plants. A comparison of the expenses of the respondent's business and of other small steam-operated electric utilities shows that the total direct operating expense was 11.63 cents per kw. hr. for the electric plant at Omro, and that the average for the others was 7.79 cents. The trouble with this comparison is that it does not reveal to what extent the difference in operating cost is influenced by wages and salaries, improper allocation of expenditures for operation and construction, and inefficiency arising from a difference in the station load and engine capacity; but, in the absence of exact figures, it furnished important evidence for consideration in reaching a conclusion. The Commission has carefully estimated a fair allowance for operating labor, materials, taxes, depreciation, and interest, and has come to the conclusion that $4,196 is sufficient for dusk to midnight service such as the respondent has furnished. Under usual conditions this figure would be divided about as follows: Wages, salaries, and materials, $2,823; taxes, $148; depreciation, $420; and interest, $805. Similar estimates have been made for all-night and continuous service. These indicate that the total cost of all-night service, assuming a conservative allowance for additional business, would be $4,911, and for continuous service $6,113. Upon comparing these several figures for expenses with the present actual earnings and with the earnings estimated for allnight and continuous service, we reach the following conclusions: (1) If the present condition of service, i. e., dusk to midnight operation, be continued, some reduction in the rates for service would be warranted: (2) If all night, dusk to dawn, service be rendered, the present schedule of rates would just about meet a fair allowance for operating expenses and interest: (3) If continuous service be rendered, a material increase in the rates would be required. The testimony adduced upon the hearing shows that the residents of Omro desire all-night service at the existing rates in preference to the present service at lower rates or continuous service at higher rates. This preference, together with the fact that convenience only rather than necessity is shown to require day service, leads the Commission to conclude that an order establishing dusk to dawn service at rates approximating those now in force is the proper solution for this action. Rates Now Effective. The rates on file and now effective for service rendered by the respondent are as follows: Commercial Lighting. Meter rates: 15 cts. per kw. hr. plus meter rental of 25 cts. per month. Discount 10% on church bills. 3-5 ampere, 240 volt, d. c. multiple inclosed arc burning on a moonlight midnight schedule. Rate $48.00 per lamp per year. 16 c. p., 240 volt, d. c. multiple carbon incandescent lamps, same burning schedule as the arcs. Rate $9.60 per lamp per year. 32 c. p., 240 volt., d. c. multiple carbon incandescent lamps, same burning schedule as above. Rate $14.00 per lamp per year. Street-Lighting Service. A copy of the street-lighting contract between the city of Omro and the Omro Electric Company shows that the city contracted for one arc lamp and eighty 32 candle power carbon incandescent lamps for $100 per month, and for such additional lamps as the city might require at $5.42 per month for each additional arc lamp, $1.20 per month for each additional 32 candle power carbon lamp, and 80 cents per month for each additional 16 candle power carbon lamp. The contract was entered into nine years ago, since which time tungsten lamps have been developed for general use. It appears that the respondent has substituted 40 watt or 32 candle power tungsten lamps for all of the 16 and 32 candle power carbon lamps, but bills the service on the basis of one arc lamp, twenty-nine 16 c. p. and sixty-eight 32 c. p. carbon lamps, according to the following schedule of monthly charges: An apportionment of the expenses between commercial and street lighting service has been made from which it is found that the rate for the tungsten street lamps may be reasonably reduced to $12.48 per lamp per year if the present moonlight schedule, from dusk to midnight, be continued. Street-lighting service would cost the city $104.98 per month, according to this rate, as shown by the following figures: This is a reduction of about 3.5 per cent from the rates now charged under the contract. It appears that the village might desire street-lighting service on an all-night moonlight schedule when the operating period is increased, in which event the rate should be advanced to $15 per lamp per year for the tungsten lamps and $60 per year for the arc lamp to cover the added expense of operation. Commercial Service. The commercial meter rates which should be put into effect are as follows: |