Comparative Income and Profit and Loss Statement of City Electric Company for Years Ending December 31, 1910, 1911, 1912, 1913 and 1914.

$68,568 09 1,290.617 39

Income statement:

Attention should be drawn to the fact that while the operating revenue for 1914, being $1,074,080.50, is only $55,099.23 in excess of the operating revenue for 1913, the operating expenses for 1914, being $796,842.24, are $200,486.65 in excess of the operating expenses for 1913, which were reported to be $596,555.59. In explanation of this very large increase in operating expenses, at a time during which there was a much smaller increase in operating revenue, the representatives of applicant herein stated at the hearing that the increase was due to the purchase by City Electric Company of the major portion of its electric energy in the year 1914 from Great Western Power Company at the price of one cent per kilowatt hour, in accordance with contract dated February 28, 1912, between Great Western Power Company, City Electric Company, Mortimer Fleishhacker, Herbert Fleishhacker and California Electric Generating Company. Applicant explains that City Electric Company can produce electric energy in its own steam generating plant in San Francisco at a cost considerably less than the price paid to Great Western Power Company, but that the matter is in reality a family affair and that the cost to Great Western Power Company of electric energy delivered to City Electric Company is somewhat less than the cost to City Electric Company of generating electric energy in its steam plant in San Francisco. The net result of this arrangement is, of course, to increase the operating expenses of City Electric Company over what they would be if the company generated electric energy in its own steam plant, to decrease the apparent net income of City Electric Company and to increase the gross revenue and the net income of Great Western Power Company.

When Great Western Power Company receives from Great Western Power Company of California, the applicant herein, the sum of $3,000,000.00 which is to be paid by Great Western Power Company of California for said $4,998,000.00, par value, of capital stock of City Electric Company, said $3,000,000.00 must, under the terms of the deed of trust or mortgage of Great Western Power Company, pass to the trustee under said deed of trust. At the request of Great Western Power Company, the trustee may permit said Great Western Power Company to use the $3,000,000.00 to pay and retire its bonds or to pay for the cost of extensions, additions and betterments to the plant of said Great Western Power Company. Applicant herein has filed its Exhibit "D" showing in general the purposes for which Great Western Power Company desires to expend said $3,000,000.00. Great Western Power Company desires, in general, to expend said money for the construction of additions and extensions to its properties in this State, and there is no present desire to use said money for the purpose of retiring bonds.

In his testimony at the hearing in the original application herein, Mr. Mortimer Fleishhacker, president of Great Western Power Company of California, stated that the payment by Great Western Power Company of California of $3,000,000.00 to Great Western Power Company for said capital stock of City Electric Company is in reality merely a family transaction in furtherance of the general plan for consolidation of the properties of the Great Western Power System. He drew attention to the fact that this Commission, if it so desires, can as readily control the expenditure of the proceeds of $3,000,000.00 in the treasury of Great Western Power Company as though this money remained in the treasury of Great Western Power Company of California. No valuation of the property of City Electric Company has been filed, and I am unable to make a finding as to the value of the property of City Electric Company.

I recommend that this portion of the application be granted, on condition that the sum of $3,000,000.00 be not taken before this Commission or any other public authority as representing for rate making, sale, issue of securities, or any other purpose, the value of the property of City Electric Company or of any equity therein, and also that Great Western Power Company of California will secure from Great Western Power Company and file herein a stipulation authorized by its directors, to the effect that it will expend said $3,000,000.00 only upon securing an order from the Railroad Commission, in the same manner as though said $3,000,000.00 had been secured by Great Western Power Company from the issue of its own securities, authorized by the Railroad Commission.

Applicant presented testimony to the effect that it is necessary for the purposes of Great Western Power System that a second transmission line be constructed from Big Bend to Oakland, at an approximate cost of $1,500,000.00, and that a third and a fourth cable be constructed across San Francisco Bay, from Alameda County to San Francisco, at an approximate cost of $150,000.00 for the third cable and $100,000.00 for the fourth cable. This property is to belong to Great Western Power Company of California, the applicant herein. No definite arrangements have as yet been made for the operation of this property. No estimate of the cost of constructing said property has been filed.

I recommend that this portion of the application be also granted, on condition that applicant herein shall first file detailed estimates of the cost of said construction, whereupon the Commission will issue a supplemental order authorizing said expenditures.

I submit the following form of order:

FIRST SUPPLEMENTAL ORDER.

A public hearing having been held on the supplemental application of Great Western Power Company of California herein, and the Railroad Commission finding that the purposes for which the proceeds from the sale of the debentures hereinbefore authorized are to be used are not in whole or in part reasonably chargeable to operating expenses or to income,

It is hereby ordered that Great Western Power Company of California may expend the proceeds from the sale of $5,000,000.00, face value, of ten-year 6 per cent convertible gold debentures, dated November 1, 1915, and payable November 1, 1925, the issue of which was authorized by this Commission's decision of December 20, 1915, in the above entitled proceeding, for the following purposes and on the following conditions and not otherwise, to wit:

1.

Proceeds from the sale of said debentures not in excess of the sum of $3,000,000.00 may be used for the purchase of $4,998,000.00, par value, of the capital stock of City Electric Company.

2.

Proceeds from the sale of said debentures not in excess of the sum of $1,500,000.00 may be used for the construction of a second transmission line from Big Bend to Oakland.

3.

Proceeds from the sale of said debentures not to exceed the sum of $150,000.00 may be used for the construction of a third cable across San Francisco Bay, from Alameda County to San Francisco.

4.

Proceeds from the sale of said debentures not to exceed the sum of $100,000.00 may be used for the construction of a fourth cable across San Francisco Bay, from Alameda County to San Francisco.

The authority hereby granted is given only subject to the following conditions:

(1) The price at which the capital stock of City Electric Company is being purchased by Great Western Power Company of California, namely, the sum of $3,000,000.00, shall not be used before the Railroad Commission, or any other public authority, as representing for rate making, sale, issue of securities, or any other purpose, the present value of the property of City Electric Company or of any equity therein.

(2) Great Western Power Company of California, before using any portion of the proceeds from the sale of said debentures for the purpose of purchasing capital stock of City Electric Company, shall first have secured from the Railroad Commission a supplemental order reciting that Great Western Power Company has filed with the Railroad Commission a stipulation satisfactory in form, agreeing that it will expend said $3,000,000.00 to be received from the sale of said capital stock of

City Electric Company, only after having secured from the Railroad Commission an order or orders authorizing the expenditure of said money, in the same manner as though said $3,000,000.00 had come to the treasury of Great Western Power Company from the issue of securities of Great Western Power Company authorized by the Railroad Commission.

(3) Great Western Power Company of California shall not expend any portion of the proceeds from the sale of said debentures for the 'construction of the transmission line from Big Bend to Oakland, the third bay cable and the fourth bay cable until said company has filed with the Railroad Commission a detailed estimate of cost of construction and shall have received from the Railroad Commission a supplemental order authorizing the expenditure of moneys for said purposes.

All the provisions of this Commission's order of December 20, 1915, in the above entitled proceeding, except in so far as modified by this first supplemental order, shall remain in full force and effect.

The foregoing first supplemental opinion and order are hereby approved and ordered filed as the first supplemental opinion and order of the Railroad Commission of the State of California.

Dated at San Francisco, California, this 29th day of December, 1915.

DECISION NO. 3010.

IN THE MATTER OF THE APPLICATION OF FRESNO INTERURBAN RAILWAY COMPANY FOR AUTHORITY TO ISSUE STOCKS AND BONDS.

Application No. 1416.

Decided December 30, 1915.

Applicant, having under construction an electric railroad out of the city of Fresno, was heretofore authorized to issue $212,500.00 par value of common stock, $350,000.00 par value of first mortgage bonds and $350,000.00 par value preferred stock, the preferred stock to be used to retire the bonds. Not desiring to issue the preferred stock, it applies for permission to issue in lieu thereof, certificates of indebtedness of an aggregate sum of $350,000.00.

Held, Application granted, provided that applicant first submit for the approval of the Commission the form of contract for the sale of such certificates and the form of receipt to be issued for partial payments thereon, also that applicant provide that such certificates become a lien upon its property subject to first mortgage bonds and furnish a copy of this decision to each person called upon to sign any agreement in connection with the purchase of such certificates.

C. C. Whittemore and J. B. Rogers, for Applicant.