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In California, all such advances are deducted, in establish* ing the rate base. If the position is taken that the monies advanced are for the purpose of guaranteeing to the Company that the extension is economically justified and that it will not become a burden to the other customers then, a» interest credit to the customers should be recognized. In this case, if a 5$ credit is used, and a 6-3/4$ return to the Company is em­ployed, these result in a relationship ©f 5$ divided by 6-3/4$, or a 0.7&5 factor is developed. Since the full $20$,14$ is subject to refund, the equivalent portion that the customer should be given credit for becomes 0.7&5 x 20$,14$, or $163,400. However, studies made by Mr. Johnson indicate that, under Rule 9-a, not more than 55$ of the advance will be returned over a period of 10 years. In the calculations for this tenative study, it has been assume* that 60$ will be repaid - or 40$ forfeited. Since such forfeitures will not be realized currently, the mean, or 20$ has been used. Accordingly, the #163,400 has been further reduced to #132,000 - the amount shown as deducted in fable A. Such a possible basis has obvious weakness, but is one basis ©f bringing the deduction to a more realistic figure. If some such basis is not used, then #190,000 will be the proper deduction - unless it is decided to stand on a legal interprets - tion that, since the ownership is with the Company, the Company is en­titled to earn on that property devoted to public service, irrespective of how it has been obtained. I would not recommend such a position. It would be damaging to your public relations, and the Commission would probably rule against you anyway, so the net result would be to incurr public disfavor. -7 -