(1) Southern California Telephone Company shall keep such record of issue, sale and delivery of the stock herein authorized and of the disposition of the proceeds as will enable it to file on or before the twenty-fifth day of each month a verified report, as required by the Railroad Commission's General Order No. 24, which order insofar as applicable, is made a part of this order.

(2) The authority herein granted to issue stock will become effective when Southern California Telephone. Company has filed with the Commission a certified copy of its amended articles of incorporation. The authority herein granted to issue stock will expire on March 1, 1924. Dated at San Francisco, California, this thirteenth day of December, 1923.

"See Commission Leaflet No. 9, p. 82.

[Cal.

Commerce Commission.

In re PROPOSED ADVANCE IN RATES OF THE AUBURN TELEPHONE COMPANY..

Case No. 13362.

Decided October 24, 1923.

Value Determined-Depreciation Charges Fixed-Increase in Rates Authorized.

CLOSING ORDER.

On May 25, 1923, The Auburn Telephone Company filed with the Commission, Rate Schedule Ill. C. C. 2, in which it is proposed to advance the rates for telephone service in Auburn, and vicinity, and in which it is further proposed that such advanced rates become effective on July 1, 1923.

It appearing from an examination of the said schedule that the Commission should enter upon a hearing concerning the reasonableness of the proposed rates, an order was entered on June 20, 1923, suspending the proposed schedule of rates until October 26, 1923. The matter came on for hearing before the Commission at Springfield, Illinois, on July 25, 1923, at which time the telephone company was represented by counsel and no one appeared objecting. The rates now in effect and the rates proposed for the principal classes of service are as follows:

At the hearing on July 25, 1923, the company presented evidence in justification of the proposed rates consisting of exhibits and testimony relative to the value of the property, the operating revenues, operating expenses, and net income of the company. For the purpose of proving the reasonableness of the proposed rates, the company has built up a valuation of the property, using as a basis the amount of $22,500, which is the minimum fair value placed on the property by the Public Utilities Commission as of June 1, 1919, in an order entered by the said Commission in Case No. 9008.* To the fair value as of June 1, 1919, the company has added net additions to the plant from June 1, 1919, to June 30, 1923, which additions amount to $11,689, making a total valuation of the property as of June 1, 1923, for the purpose of this case, of $34,189. The amount set aside annually for accruing depreciation is based upon the Commission's order* of June 1, 1919, and which for the year 1922 amounted to $2,474, appears from the evidence of record to be a reasonable allowance.

The total operating revenue of the Auburn Telephone Company for the year 1922, as shown by exhibits presented by the company, was $11,643. The total operating expenses for the same period of time, including an allowance of $2,474 for depreciation of plant and equipment, were $10,966, resulting in net operating revenue of $677. The taxes during the year 1922 and other deductions from gross income amounted to $799, thus resulting in a net deficit of $122. The company estimates that the application of the proposed rates will increase the net annual revenue by $2,919. The net amount available for interest and return on the investment, assuming that the operating expenses will continue substantially the same as they were during the year 1922, will be $2,797, which will result in a net income of approximately 8.2 per cent. on $34,189. The company claims that in addition to the operating expenses shown for the year 1922, an additional sum of $1,200 should be allowed as compensation for management

Noted in Commission Leaflet No. 95, p. 1502.

[II].

C. L. 145] and general supervision of the company by its general officers. The record in this case, however, does not justify this additional expenditure. Inasmuch as the proposed rates result in an income of approximately 8.2 per cent. upon the fair value of the plant hereinafter found, the same appear to be excessive, and a modified schedule of rates has been developed which will increase the annual operating revenue by approximately $2,274, thereby resulting in a net annual income of $2,152, which is 6.3 per cent. upon the fair value of the property hereinafter found.

The Commission having given due consideration to all the evidence in this case is of the opinion, and finds:

1. That the fair value of the property of the Auburn Telephone Company used and useful in furnishing telephone service in Auburn, and vicinity, as of June 30, 1923, including all elements of value, tangible and intangible, is $34,200.

2. That a reasonable allowance as an item of operating expense to provide a reserve against depreciation is $2,474, plus 6 per cent. of all additions made to the plant of the Auburn Telephone Company from and after June 30, 1923.

3. That the present annual operating revenue of the Auburn Telephone Company is approximately $11,643, and that the present annual operating expense, including taxes and other deductions from net income, is $11,765, thus resulting in a net deficit of $122.

4. That the application of the proposed rates will increase the net annual operating revenue by approximately $2,919, thus resulting in a net annual income of $2,797, which is 8.2 per cent. on the fair value of the property, and that the proposed schedule of rates is excessive and should be permanently suspended, cancelled and annulled.

5. That the modified schedule of rates hereinafter found will increase the net annual operating revenue by $2,274, thereby resulting in a net annual income of $2,152, which is 6.3 per cent. return upon the fair value of the property.

6. That the modified schedule of rates is just and reasonable and should be authorized.

It is, therefore, ordered by the Illinois Commerce Commission, as follows:

Section 1. That Rate Schedule Ill. C. C. 2, of the Auburn Telephone Company, filed with this Commission on May 25, 1923, be, and the same is hereby, permanently suspended, cancelled and annulled.

Section 2. That the Auburn Telephone Company, be, and the same is hereby, permitted and authorized to file the following schedule of rates to be designated as Ill. C. C. 3, covering telephone service in the city of Auburn, county of Sangamon, and vicinity, effective November 1, 1923, provided the said schedule of rates is filed with the Commission not later than ten days after the date of service of this order; or effective at any subsequent date, provided the said schedule of rates is filed with the Commission not later than ten days prior to the effective date of the said schedule. The said schedule of rates when filed with the Commission as specified herein, and posted or filed in the office of the public utility, all as required by the Illinois Commerce Commission Act and General Order No. 28,* as amended, adopted by the Commission, shall be the legal rates for telephone service in the city of Auburn, and vicinity, county of Sangamon. The rates for the following classes of service shall be stated in words and figures as follows:

[Ill.