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developed, show the amounts used. Under the Inveateent basis, tbs actual reserve set up m th© books for the ^ter ^Mllty, less the defense plant amortisation, Ms been used for the year 1949. For the de­fense plant amortisation write-off, the regular depreciation accrual has been computed for plant capital of that age, and thus a new reserve requirement ms calculated and used* In further reference to the defense plant amortisation, attention is directed to Table 1 which Shews that during the 4 years 1949 to 1946, Inclusive, $160,489.97 was written off a© an accounting transaction* However, during these &mm years, the water cospany not only failed to earn a fair return but, a# a mtter of fact, the net earnings were in the red to the extent of $66,628. Sine© this defense capital, so called, is, as a mbter of fact, represented by cast iron water mins that are present* ly used and useful in rendering water service to the regular «sna a towers of the Water Company, that capital, reduced by the regular depreciation accruals, is left in the rat® base. In figuring the allowance for the annual depreciation Oji expense rwqplrenent, no amount Is provided for 3m the expense allowances for defense capital* This latter item will be further discussed under Results of Operation, For the Original Cost and Present hay Coet rate base figures, as shown in Tables F and 0, respectively, reserve requirements have been cceqsuted on eowseidmt shorter lives than currently employed. liCiUti'Cs For the ^reduction U Jimpany, the 4$“*' depreciation rat© as r 1/ The 4$ depreciation rat© ms not looked upon as providing for depreciation alone, but for maimgcmnt expense costs that were not charged under the current ssethod of billing.