We are inclined as between these two judgments to accept the method used by Peters, for the reason that his judgment is matured by over thirty years of service in the actual construction and development of the telephone properties. Accordingly, we admit the sum of $342,323 into the rate base for the item of interest during construction, this being 3.30 per cent. of the value of the physical property, depreciated on Snell's formula.

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(C) Working Capital: After an undertaking has purchased its land, acquired rights-of-way, erected buildings, constructed the plant and installed the equipment necessary to carry on its operation, there is still a further investment of capital required to make the enterprise a going concern. This investment is known as working capital. It should include, ordinarily, supplies usually required for the current operation of the business and to meet possible emergencies; cash sufficient to provide for working advances, prepayments, wages and other expenses from time to time of beginning operations or giving service until receiving payment therefor; and bank balances to meet current requirements, and insure accommodations. In the Great Falls Gas Company Case, 15 Montana U. R. 379, we approved the following language from the Helena Light and Railway Company Case, 13 Montana U. R. 191; P. U. R. 1920-D, 668:

"An established utility is required in carrying on its business to tie up a certain amount in material and supplies, and to keep on hand a certain amount of cash for the payment of employees and the regular discharge of accounts payable. This amount represents an essential capital investment usually termed 'working capital,' and it is, therefore, proper to make allowance for this purpose."

Examples of the methods employed to ascertain this requirement, and of the various percentages adopted, may be seen by a reference to the cases cited in the footnote.*

In re Application of the Rochester, Corning and Elmira Traction Company, 1 N. Y. P. S. C. R. (2nd Dist.) 166; New York City Eighty-Cent Gas Case, 157 Fed. 849; Mayhew et al. v. Kings County Lighting Com

L. 148]

In allowing for the working capital of a company that has been engaged in business for some time, it is not necessary to employ any of the theoretical methods that might be suggested, or to depend upon estimates or opinions. Accrued experiences furnish persuasive evidence of the proper allowance, for the amount actually employed can be definitely determined through an analysis of the ac

pany, 2 N. Y. P. S. C. R. (1st Dist.) 659; Bonbright et al v. Corporation Commission of Arizona et al., 210 Fed 44; In re Rates of Public Service Gas Company (New Jersey), 16 C. L. 354; Pillsbury et al. v. People's Gas Light Company (New Hampshire), 32 C. L. 608; Marquis v. Polk County Telephone Company (Nebraska), P. U. R. 1915-C, 140; Omaha and Lincoln Railway and Light Company (Nebraska), P. U. R. 1915-B, 416; Pioneer Telephone and Telegraph Company v. Westenhaver et al., 118 Pac. 354; In re The Mountain States Telephone and Telegraph Company (Colorado), P. U. R. 1917-B, 198; In re The Mountain States Telephone and Telegraph Company (Idaho), P. U. R. 1921-B, 739; In re The Mountain States Telephone and Telegraph Company (Utah), 114 C. L. 1541; In re Investigation of Rates and Charges of The Mountain States Telephone and Telegraph Company (Arizona), P. U. R. 1920-B, 411; In re Utica Gas and Electric Company (New York), P. U. R. 1922-A, 146; In re Kokomo Gas and Fuel Company (Indiana), P. U. R. 1921-E, 390; In re Fargo and Morehead Street Railway Company (North Dakota), P. U. R. 1921–E, 716; In re Bluefield Waterworks and Improvement Company (West Virginia), P. U. R. 1921-E, 655; In re Interstate Light and Power Company (Wisconsin), P. U. R. 1921-E, 161; In re Kinkaid (Idaho), P. U. R. 1921-E, 147; In re Stites-Kooskia Telephone Company (Idaho), P. U. R. 1921-E, 147; In re Plymouth Electric Light Company (New Hampshire), P. U. R. 1922-B, 467; In re City of Sault Ste. Marie et al. (Michigan), P. U. R. 1922-B, 149; In re Long Island Lighting Company (New York), P. U. R. 1922-B, 1; In re Central Arizona Light and Power Company (Arizona), P. U. R. 1921-D, 163; In re Southern California Edison Company (California), P. U. R. 1921–D, 65; In re Public Service Railway Company (New Jersey), P. U. R. 1921-D, 593; In re Cape May Illuminating Company (New Jersey), P. U. R. 1921-D, 695; In re Lansing Fuel and Gas Company et al. (Michigan), P. U. R. 1921-C, 465; In re The Chesapeake and Potomac Telephone Company (West Virginia), P. U. R. 1921-B, 97; In re Southwestern Bell Telephone Company (Arkansas), P. U. R. 1921-B, 516; In re Board of Trustees of the Village of Lyons v. Wayne Telephone Company (New York), P. U. R. 1921-A, 385; City of Winona v. Wisconsin-Minnesota Light and Power Company (U. S. Dist. Ct., Minnesota), P. U. R. 1921-A, 146; In re The Chesapeake and Potomac Telephone Company (District of Columbia), P. U. R 1920–D, 614.

counts involved. Snell assumes that one-twelfth of the total operation of the State of Montana.

"would be an amount which would represent a portion of the working capital."

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This assumption rests, in part, on the further assumption that while, as a matter of principle, the telephone customer is required to pay for exchange service in advance of service rendered, nevertheless from fifteen to twenty days may elapse during which time the company is carrying the customer for the service rendered, and that generally speaking the established toll service is a credit service, some sixty days generally elapsing before collection for that service is made. He, therefore, takes one-twelfth of the operating expenses of the company for the year 1922, one-twelfth of the amount charged in unbilled tolls and to this he adds $85,045, representing the inventory figure for material and supplies on hand as shown by the company's books at the end of the year 1922. We regard this method as unsatisfactory. The allowance for unbilled tolls does not correspond with the credit period for that service. The fact that the stock on hand at the end of the year represents a certain amount is no indication whatever of the amount of material and supplies necessarily kept on hand through the twelve preceding months, in the absence of proof showing the withdrawals and refillings of the material and supplies on hand throughout the year. Not confident of the correctness of this figure of $85,045, Snell, nevertheless employs it

"due to the fact that the Western Electric Company maintains storehouses at Seattle, Salt Lake City and Denver, and shipments can be readily forwarded to nearly all points in Montana as the necessity arises." For the company the evidence is presented in a special study built from the averages of monthly balances for twelve months. So far as practicable, the items entering into working capital for the State of Montana, are taken directly from detailed records kept by states or exchanges. For certain items, however, the amount applicable to Montana could only be obtained by proration. The owned

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subscribers' stations is the natural standard of measurement for telephone companies and has been generally adopted as the unit in telephone accounting. Montana is found to possess, for the twelve months of 1922, 13.68 per cent. of all the company stations. A summary of the study shows the following:

$292,378 19

Average required for working capital, Year 1922........

We are frank to say that we have never had a case where the method employed was as satisfactory as the method followed in this case. And since the claim for $292,378.19 rests on the realities of routine business for the last available annual period, we pass that figure into the rate base. (D) Cost of Establishing the Business: The cost of establishing the business is also known as going value or going concern value. Exploitation of the subject leads the student at once into unmarked and treacherous territory. In the case of Billings v. Billings Gas Company, decided February 19, 1924, reported ante, at page we rejected a claim for going concern value founded on the capitalization of past deficits. We there said:

“Here, as usual, the record presents a sharp conflict. The city contends that no going concern value whatsoever should be allowed the gas

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company in this case. On the other hand, it is contended by the utility that $150,000 should be allowed to cover going value. This claim is made on the ground that the Billings Gas Company has been in operation about eleven years and, so far as the records show, has not, during that entire time, made any money, and the contention is that these losses and indeed all deficits under an assumed fair return through the past years, should be set up as part of the value of the company. This is the familiar claim that previous losses should be capitalized. To concede this would be to guarantee income and would raise a correlative duty to account for earnings beyond what were reasonable in the past. A rate established as reasonable whether by the company or by the Commission, is, after all, a mere prophecy and the returns assumed thereunder are not guaranteed by the Commission or by the public. Whether the rate actually yields more or less than a fair return during the continuance of the business is a risk of the business. There is no suggestion here that the company has been required to bear losses by reason of erroneous decisions of the Commission, or indeed of the courts. For aught that appears, the law has been obeyed in the fixation of rates reasonable when established and if its operation has been overcome by hard circumstances, the public may not be charged with the deficits. It used to be the fashion to rely on Des Moines Gas Company v. City of Des Moines, 238 U. S. 153, in justification of an allowance for going concern value and we have heretofore blindly followed, being more anxious not to offend than to insist on proper evidence of such value, but since the opinion in Galveston Electric Company v. City of Gaiveston et al., 258 U. S. 388, decided April 10, 1922, indicating that capitalization of accrued losses is not a proper measure of going value, reason again asserts herself by demanding intelligent proof of the element. In the Galveston Case it is said: The fact that a utility may reach financial success only in time or not at all, is a reason for allowing a liberal return on the money invested in the enterprise; but it does not make past losses an element to be considered in deciding what the base value is and whether the rate is confiscatory. A company which has failed to secure from year to year sufficient earnings to keep the investment unimpaired and to pay a fair return, whether its failure was the result of imprudence in engaging the enterprise, or of errors in management, or of omission to exact proper prices for its output, cannot erect out of past deficits a legal basis for holding confiscatory for the future, rates which would, on the basis of present reproduction value, otherwise be compensatory. City of Knoxville v. Knoxville Water Company, 212 U. S. 1, 14; 53 L. Ed. 371, 380; 29 Sup. Ct. Rep. 148.

"Nor is there evidence in the record to justify the master's finding that a business brought to successful operation “should have a going concern value at least equal to one-third of its physical properties." Past losses obviously do not tend to prove present values. The fact that a sometime losing business becomes profitable eventually through growth of the com