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Mr. sdward C. Renwick -4 - November 23 s 1951 D 1sadvantages 1. Lose incom© t a x c r e d i t under a c o n s o lid a t e f i l ­in g i f e a rn in g s a re p o o r on th e w a te r o p e r a t io n s . 2 . C ost o f R a ilr o a d o p e r a t io n s r a is e d in Las Yegas D iv is io n because w a te r p ro d u c tio n no lo n g e r a v a i l a b l e to ab sorb p a r t o f man hours and o v e rh e a d . 3. C osts f o r w a te r purchased fro m a t e r Company may be h ig h e r ( o r p o s s ib ly l e s s ) th an under i t s own op­e r a t io n . 4 . C ost In v o lv e d in making th e c o r p o r a t e ch ange. 5. L ess d i r e c t c o n t r o l o f th e w a te r o p e r a t io n . Inasmuch as i t i s b e lie v e d t h e r e i s no in t e n t io n o f bur­d e n in g th e w a te r o p e r a t io n s — and s in c e such a re now a burden on th e R a ilw a y , none o f th e d is a d v a n ta g e s g iv e n a r e o f much moment. The o b j e c t i v e i s to im prove e a rn in g s and n o t o p e r a te t o ta k e "a d v a n ta g e " o f lo s s e s . I f th e s t e p s ta k en w i l l r e s u lt in b e t t e r e a rn in g s (a n d / or make p o s s ib le a h ig h e r s a le s p r i c e ) and im proved p u b lic r e l a ­t i o n s , th en such must be view ed as j u s t i f i e d . F in a n c ia l S tr u c tu r e The s e c u r i t i e s is s u e d should be f u l l y c o v e re d by p r o p e r t y a s s e t s . S in c e th e r e g u la t o r y p r a c t ic e uses a n e t c a p i t a l base (in v e s tm e n t le s s d e p r e c ia t io n r e s e r v e ) t h a t sh ould be th e s ta n d a rd , in my o p in io n . On th e D is t r ib u t io n Company, as i t now s ta n d s , t h e r e i s th e bothersom e ite m o f p la n t a m o r t iz a t io n s o f #160,483 and Customer Advances in a id o f c o n s tr u c tio n o f p o s s ib ly some #400,000 as o f th e end o f t h i s y e a r . A f t e r a llo w in g f o r a 5$ o v e rh e a d , w hich was e s tim a te d as n o t c a p i t a l i z e d in p la n t and f o r th e p o r t io n n o t e s tim a te d to be re fu n d e d , a f i g u r e o f #280,000 was used as a d e d u c tio n from th e f i x e d c a p i t a l in s e t t i n g up th e R ate Base in th e c a se b e fo r e th e Commission. The a p p rox im a te n e t c a p i t a l s tr u c tu r e rounded o f f as o f th e end o f t h i s y e a r would b e : W ater P r o d u c tio n Company W a ter D is t r ib u t io n Company C o rp o ra te Su rplu s T o t a l # 755,000 585,000 TT5W,075(3 # 60,000 1,400,000