149] ment of the thoroughness and reliability of the accounting and construction methods of handling improvements and extensions to the plant. In no instance was there found any attempt to increase the plant value unduly, but, on the contrary, a general policy of conservatism in increasing the book value of the plant was evidenced. We find that the expenditures as summarized above are properly capitalizable and that it is for the public good that the issue of securities prayed for in the petition be authorized. An order will issue accordingly. ORDER. Upon consideration of the foregoing report, which is made a part hereof, It is ordered, That authority be, and hereby is, granted to the Coos Telephone Company to issue and sell at not less than par and accrued interest, $125,000, par value, of its twenty-year 6 per cent. debenture bonds, and 5,000 shares of its capital stock of the par value of $25.00 per share, the same to be offered to its stockholders in proportion to their respective holdings for cash at par, under conditions set forth in the votes of the stockholders pertaining thereto. It is further ordered, That the proceeds from the sale of said bonds and stock shall be used for the payment or refunding of outstanding indebtedness incurred in acquiring property and in constructing, completing, extending, and improving its plant, equipment, and facilities for doing business as outlined in said report. It is further ordered, That on January 1, and July 1, in each year, said company shall file with this Commission a detailed statement, duly sworn to by its treasurer, showing the disposition of the proceeds of said securities until the expenditure of the whole of said proceeds shall have been fully accounted for. By order of the Public Service Commission of New Hampshire this tenth day of April, 1924. NEW YORK. Public Service Commission. CITY OF JAMESTOWN et al. v. JAMESTOWN TELEPHONE Value Determined CORPORATION. Case No. 125. Decided March 12, 1924. Present Rates Found Disproportionate and The Jamestown Telephone Corporation filed a schedule of increased rates for Jamestown against which the city of Jamestown and the Jamestown Chamber of Commerce filed complaints. The Commission after an examination of the affairs of the company since it began business on May 1, 1919, found that, notwithstanding two increases in rates, the company had failed to earn dividends or even to earn a return sufficient to wipe out its deficit incurred in the years 1919 and 1920; that the company began the year 1924 with a deficit of $16,947.04. The Commission further found that a discriminatory situation existed whereby different rates were effective in different localities within the area served from Jamestown for the same service; that this was not in accord with the generally accepted telephone practice which seemed to require the restoration of toll charges to outlying points and thus equalize the rates now charged in the various exchanges; that the rates at present charged in Jamestown were disproportionate, and that the variance between classifications of service was too great and retarded growth; that an adjustment was, therefore, necessary. Held: That the value of the company's property as of December 31, 1923, for rate-making purposes was the amount found by the former Commission, plus net additions to capital account since that date, amounting in the aggregate to the sum of $1,204,784.89, less the amount of the fixed capital reserves as of that date, amounting to $135,701.28, plus an allowance for working capital of $75,000, or $1,144,083.61; That the net monthly rates and charges of the Jamestown Telephone Corporation, effective in the territory under consideration, should be as follows, from and after April 1, 1924, and until further order of the Commission: within the base rate territory A: business. individual line. $8.00, two-party line, $6.75; residence, individual line, $4.00, two-party line, $3.50, four-party line, $3.00; within the territory outside the base rate territory A: rural business, $3.75, rural residence, $3.00. L. 149] OPINION. A plan for the unification of the telephone service in the western portion of the State by purchases and sales of competing telephone properties was laid before the Department of Justice, Washington, D. C., by the parties in interest in December, 1917. This plan contemplated the sale of the property of the Federal Telephone and Telegraph Company (independent) at Buffalo, and vicinity, to the New York Telephone Company (Bell), and the sale of both Bell and independent properties at Jamestown and Rochester to new corporations to be formed. Following the receipt of an opinion by the Attorney General that the plan would not be contrary to the policy of the Department as formulated by previous conference between the Attorney General and the Bell and independent interests, the sale of the Buffalo federal independent property to the New York Telephone Company was consummated, and on February 25, 1918, an agreement was made for the sale of the properties of the Home Telephone Company of Jamestown, the East Randolph Telephone Company, the Chautauqua Telephone and Telegraph Company and that part of the New York Telephone Company's property situated in the city of Jamestown, and vicinity, to a new corporation to be called the Jamestown Telephone Corporation. On September 23, 1918, the Jamestown Telephone Corporation was organized and on November 26, 1918, this new corporation petitioned the former Public Service Commission, Second District, for a certificate of convenience and necessity to construct its lines, for approval of the transfer to it of certain local franchises and for authority to issue securities. The sales contract provided that the new corporation. should pay for the properties in its securities as follows: For the properties of the Home Telephone Company, East Randolph Telephone Company and the Chautauqua Telephone and Telegraph Company, $200,000 in common stock and $36,000 in bonds, with the assump [N. I tion of $232,000 mortgage bonds and notes outstanding against these companies; For the property of the New York Telephone Company, $25,000 in common stock, $250,000 in bonds, $250,000 in Class A, 5 per cent. preferred stock, and $206,000 in Class B, 5 per cent. perferred stock. It was further provided in the contract that the Class A preferred stock would come into voting power, provided the new corporation failed, after five years of operation, to pay 5 per cent. dividends on this stock. Inventories and appraisals of all the properties were submitted and were carefully checked in the field by the Commission's engineers. The petitioners claimed a structural value of the independent properties of $528,355 and a structural value of the New York Telephone Company's property of $750,500, both as of September 30, 1918. A hearing on the petition was held at Buffalo on March 8, 1919, and upon this record and a preliminary survey by the Commission's engineers, an order was entered granting the new corporation a certificate, with approval of the transfer of franchises and authority to issue securities in the amount of $1,000,000. Titles were passed to the new corporation on May 1, 1919, and upon bringing up the inventory to that date and revising the appraisal the Commission's engineers found the fixed capital of the independent properties to be $324,657 and that of the New York company's property to be $678,765. Upon this finding, and making allowances for intangibles, live accounts due from subscribers, and working capital, the Commission on the seventeenth of February, 1921,* authorized the issue of $46,600 additional securities. In the meantime, the corporation filed tariffs to be effective March 1, 1920,† increasing its rates in Jamestown to the following figures: L. 149] The city of Jamestown thereupon made complaint against these rates but, after hearing, the complaint was dismissed, it being found that the new rates would still leave an operating deficit. On July 3, 1921, the company again increased its rates. to the following (net): Individual line Four-party line * Business Residence Complaint against these rates by the city and Chamber of Commerce of Jamestown comprises the case now under consideration. The statute requires us to determine such just and reasonable rates to be charged by this company as will, among other things, be sufficient to reimburse the company for its reasonable operating expenses and yield a reasonable average return upon the value of the property actually used in the public service. We are thus required to fix the value of the property of the Jamestown Telephone Corporation, and to examine into its operating expenses. As before stated, the Jamestown Telephone Corporation was organized in 1918 to acquire various telephone properties in the city of Jamestown, and vicinity. It began operations May 1, 1919, and its capitalization was fixed by the Public Service Commission, Second District, in Case No. 6673. In that case, public hearings were held by the Commission, and the city of Jamestown was represented by its corporation counsel, and procured from the Jamestown Telephone Corporation and caused to be inserted in the record and in the order finally determining the value of the properties to be acquired, a stipulation appearing in Ordering Clause No. 8 of the supplemetnal order† entered March 17, 1921, viz: The city of Jamestown appeared in this proceeding by Ernest Cawcroft, Esq., its counsel, with a view of scrutinizing the fixed capital of * See Commission Leaflet No. 117, p. 486. |