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(L e t t e r h e a d o f ) \ ROY A. WEES C o n s u ltin g E n g in e e r P a c i f i c M u tual B u ild in g 660 M arket S t r e e t San F r a n c is c o 4 , C a l i f o r n i a November 2 3 , 1951 C 0 P Y M r. Edward C. Renwick A s s is t a n t G e n e ra l S o l i c i t o r O nion P a c i f i c R a ilr o a d Company Re: F i l e 4705-11-22 422 West S ix th S t r e e t Los A n g e le s 14, C a l i f o r n i a D ear M r. Renw lck: 1 was p le a s e d t o r e c e i v e you r l e t t e r o f November 15 and thus be brou gh t up t o d a t e on th e p r o g r e s s o f th e w ork and y ou r t h in k in g . I have been p o n d e rin g o v e r th e s u g g e s tio n r a is e d by you as to th e p o s s ib le a d va n ta g e s and d is a d v a n ta g e s i f th e W ater Company owned and o p e ra te d b o th th e p ro d u c tio n and d i s t r i b u t i o n f a c i l i t ­i e s as an in d ep en d en t company. I f th e a s s e ts o f th e P r o d u c tio n Company, as re p re s e n te d by i t s w a te r p ro d u c tio n and tr a n s m is s io n f a c i l i t i e s , w ere t r a n s fe r r e d t o the D is t r ib u t io n Gompany and th e l a t t e r d iv o r c e d from I t s o th e r c o r p o r a t e a c t i v i t i e s and r e o r g a n iz e d , th e o w n ers h ip , th rou gh s e ­c u r i t i e s to be Is s u e d , would n e c e s s a r ily have to be h e ld by Union P a c i f i c . I say " n e c e s s a r ily " f o r th e rea son t h a t I do n o t b e lie v e th e r e would be any p u b lic m arket a t th e p r e s e n t tim e f o r two p r in ­c i p a l r e a s o n s , nam ely because o f : 1. The p r e s e n t and r e c e n t p a s t u n s a t is fa c t o r y earn ­in g s . 2. The c r i t i c a l w a te r su p p ly s it u a t io n . The most u rg e n t c o n d it io n t o f o l l o w up on i s ite m ( 1 ) , t h a t l a , t o keep a t th e ta s k o f s e c u r in g th e n e c e s s a r y e a rn in g s th rou gh h ig h e r r a t e s f o r w a te r s e r v i c e . The q u e s tio n th en a r i s e s , i s th e r e any a d va n tage in ch an gin g th e c o r p o r a te s e t- u p , even though th e ow n ersh ip in e f f e c t rem ains unchanged and because o f t h a t , th e r e g u la t o r y a u t h o r it y and many o f th e w a te r cu stom ers a re n ot to o much con cern ed i f th e " r i c h ” U nion P a c i f i c d o es n o t earn th e g e n e r a lly a c c e p te d r a t e o f r e t u r n . B e fo r e exam in in g some o f th e c o n s id e r a t io n s t h a t management