present value. It was said in the case of Reagan v. Trust Co., 154 U. S. 412, 14 Sup. Ct. 1059: 'It is unnecessary to decide, and we do not wish to be under stood as laying down as an absolute rule, that in every case a failure to produce some profit to those who have invested their money in the building of a road is conclusive that the tariff is unjust and unreasonable. And yet justice demands that every one should receive some compensation for the use of his money or property, if it be possible, without prejudice to the rights of others.'" In the case at bar, the proof shows the capital stock of plaintiff to be $300,000, and outstanding bonds $200,000. The amount of cash invested in the entire plant,-I now refer, as I have heretofore referred, to the gas plant alone, eliminating entirely the electric plant,-in the entire gas plant, as shown by the construction account of the company, appears a cash investment of $466,532.93, and patent rights purchased of $172,096.94, aggregating $600,000. None of the experts place the cost of reproducing the plant at a sum equal to the stock and bonds. The bonds outstanding were issued almost entirely in payment of certain patent rights which were sold to the gas company. The proof shows that a part of those patents-the exact part is not shown-has expired, so that their present value to the gas company is greatly below the amount of outstanding bonds. Whether, at the time of the purchase of these patent rights, that is, the right to use the improvements secured by the patents, the value of the patents to the gas company was properly measured by the bonds given for such purchase, is not fully apparent, but the testimony strongly tends to show that at least it was then so regarded by the parties to the transaction. Yet the circumstances surrounding such transaction have this peculiarity: A Pennsylvania corporation, known as the United Gas Improvement Company, is the owner or manager of a large number of gas plants at different points in the United States, the plaintiff being one of that number. The patents were sold by the United Gas Improvement Company to the plaintiff. While this fact does not of itself impart to the transaction any fraud or bad faith, it nevertheless suggests and demands a more searching inquiry into the details, and a more careful weighing of the facts involved. As to the consideration of such bonds, I mean, the consideration which is proper to be here considered, and included in the value of this gas plant at present, or on which interest is to be allowed,—the proof does not satisfy me. Such of the bonds as were issued in purchase of patents now expired cannot here be considered, in the attempt to ascertain the basis on which the reasonableness of rates is to be determined, for those patents have now no market value. And if more was originally paid for such expired patents than at the time of their purchase was justified by their importance to plaintiff, and by the length of life they then possessed, an element thereby enters into the loss column of plaintiff's profit and loss account, and is not now to be considered as an active element in fixing reasonable rates. Besides, the proof is that these bonds were issued in purchase of "all the patents that the United Gas Improvement Company owns"; not alone the "patents in use in the city of Des Moines," but also "whether used in this city or elsewhere." Testimony of Lillie (interrogatories 24, 25, 29). So that, confessedly, a

part of the bonds was issued for patents not used at all by plaintiff. Manifestly, these should not be included in arriving at the basis we are now seeking. Nor should there be included any amounts expended or investments made by plaintiff in its attempt or experiment, however laudable these attempts may have been, to supply fuel gas to the citizens of Des Moines, and which were expended or invested in directions not now required, or not properly serviceable for the company's present uses. These must be laid aside, among any other unprofitable investments in the history of the company. These may evidence the creditable desire of the company to keep its works fully abreast with progressive idea of gas making. But they are now of no market value. In other words, the court may not now regard the rates as properly to be increased above what would otherwise be reasonable for the purpose of allowing plaintiff to recoup losses heretofore incurred in any unfortunate or unprofitable investments it has made, or to charge and receive interest on losses thus incurred. In this connection I wish to say that the proof presented on the hearing fully absolves the plaintiff from any rascality on the part of those engaged in the construction or management of plaintiff's property. Having quoted from Justice Brewer, wherein he has used those words, it is but just to plaintiff to state that the proof, without contradiction, shows no presence of dishonest methods or management in plaintiff's business methods or affairs, but, on the contrary, an honest and most creditable business management. In the opinion delivered by Justice Brewer in the case last quoted from (Ames v. Railway Co.), the learned justice, after having considered at some length different elements claimed to be legitimate factors in the basis from which the reasonableness of rates was to be determined, says (page 178):

"Considerations such as these compel me to say that I think there is no hard and fast test which can be laid down to determine in all cases whether the rates prescribed by the legislature [city council] are just and reasonable. Obviously, however, the effect of the reduction upon earnings is the first and principal matter to be considered."

Perhaps the factors which affect the question of earnings-that is, the reasonable cost of manufacture, etc., as applied to incomeare not more difficult in this case than generally may be anticipated in like cases. But, between the extremes of the expert testimony introduced on either hand, we have here irreconcilable differences. The cost of manufacture involves many matters wherein this difference of judgment will arise, however honest the expert, and his attempt at unprejudiced opinion, for the basis of the opinions on either hand are from radically differing standpoints of view. Under the proof presented, the plant is in excellent condition and efficiency, and the cost of its reproduction appears to be the substantial equivalent of its value. The estimated cost of reproducing the present gas plant of plaintiff varies, under the proof as presented by the company, from about $450,000 to $500,000. Some proof has been introduced by defendant which places the cost of erecting a plant, laying the mains, and placing the plant in same operative condition in which plaintiff now is, at about $330,000. The evidence, without

contradiction, shows that the plant, under present management, is in excellent condition. Some criticism appears as to whether plaintiff has thrown a proper share of the expense upon the electric light company, which offices with plaintiff, has its works on plaintiff's real estate, and, to a considerable extent, is of ficered and managed by the same persons as plaintiff. But I see little cause of complaint in this respect. Apparently, the accounts of the two concerns are kept separate, and each charged with its own expense. Except as to a charge-not shown to be made, but which should be made-for use of plaintiff's real estate by the electric light company's works, no improper or unfair element appears, as between these two plants. Defendant insists that a part of the present gas plant is not only unnecessary for present use in supplying gas in Des Moines, but also for probable use in the near future, and that that part of the plant devoted to manufacture of coal gas should not be included in any computation for determining the money value, or in any basis used for determining on what plaintiff may rightfully ask income or profits. The fact that plaintiff has at Des Moines, in operation, two distinct or separate parts of its gas plant,-one for manufacturing coal gas, the other for water gas, has served to increase greatly the difficulties attending a decision of this matter. If I remember rightly, all the witnesses agree that, the coal-gas plant having been erected and being on the plaintiff's ground, they would not recommend its destruction. There exists a marked difference of opinion among the experts as to whether, if erecting a new plant, they would advise such coal-gas plant to be included as a part of it. The trend of proof is to the effect that the later-built plants are almost exclusively for the manufacture of water gas. But on this point I am not satisfied that it would be improper to include the coal-gas plant, and therefore, for present hearing, retain it as a part of the property to be considered in our calculations as to rates. But its retention complicates the decision herein, for there is thus retained an element whose exclusion would take with it many obstinate and perplexing questions. Returning to the attempt to ascertain the cost of present reproduction of plaintiff's gas plant, or rather of a gas plant which shall be equally efficient and capable in supplying gas to the defendant and its citizens, and examining the proof for that purpose as introduced by plaintiff and defendant, I conclude that suitable and proper real estate could be obtained, and such plant 1 erected, mains laid, etc., with same efficiency to meet demands of the city as that now possessed by plaintiff, for $400,000. The experts sworn on plaintiff's behalf have varied in their figures from about $450,000 to about $500,000. From these estimates must be taken that part of the present plant which was used for fuel gas, and is now not available for present use; also, the overestimate by them made on the real estate; and also making allowance for storage capacity on the holder last erected beyond what seems, under present circumstances, profitably necessary. On the whole proof, I reach the conclusion above announced. The profit and loss statement intro

duced by plaintiff for the years 1891 to 1894 shows that plaintiff received for gas supplied as follows: 1891, $1.50 per 1000 feet; 1892, $1.55 per 1,000 feet; 1893, $1.59 per 1,000 feet; 1894, $1.56 per 1,000 feet. By reference to this statement for 1894, it will be noticed that plaintiff has charged, as against the gas used by itself, almost 69 cents per 1,000 feet. I am not authorized, under the proof as to its cost, to assume that this rate was so taken by plaintiff because it regarded that as the actual cost per 1,000 of the gas used by it. But I am not advised why the charge for this gas is thus made. Making allowance for the proportionate discount as shown in such statement, it will be seen that the remainder of gas, -that supplied to city and citizens,-as shown in this 1894 statement, brought to the plaintiff the net rate per 1,000 of $1.57}. By thus charging gas used by plaintiff at the same rate as that supplied to city and citizens, the average rate obtained for gas supplied would be increased by something over 1 per cent. additional.

We now turn to the cost of making and distributing gas. Here we have the proof by plaintiff, based on its statement of actual expenditures, showing the cost as follows: 1891, $1.056; 1892, $1.15; 1893, $1.23; 1894, 93 cents. Plaintiff insists that the cost (93 cents), as thus shown in the last year named, cannot be taken as a correct basis for the future, because, as it is claimed, of that year's unusually low cost of materials which enter into the manufacture of gas. Plaintiff insists that the correct average, as to cost of gas hereafter, would be the average of these four years, or $1.09 per 1,000 feet. It may be conceded that there appears no full and satisfactory explanation for the dropping from $1.23 in 1893 to 93 cents in 1894. Perhaps one of the reasons may be found in the affidavits of Manager Pratt and Foreman Pugh, and in the tables presented as to the results accomplished under Foreman Pugh's supervision. Certain it is that better results have been accomplished than theretofore seemed possible. The proof fails to show such reductions in material as thereby to account for this decrease in cost to plaintiff for that year. I may here say that all the expert witnesses-even those who testified at the instance of defendanttestify to the manifest ability and efficiency, and the apparent economy, of Mr. Pratt's management. I am not inclined to include in this hearing for the writ, as one of the proper elements relating to cost of gas, the rental of land paid by plaintiff for that part of the real estate on which plaintiff holds a purchase option, but which was not actually and properly occupied by plaintiff in the operation of its gas plant. This rental has been included by plaintiff as one of the expenses, in arriving at the cost of gas as it has given it. While it may be, as claimed, good business policy on part of plaintiff to hold this land under the present option, looking to its purchase hereafter in the growth of the plant, I question whether plaintiff may at this time rightfully insist that this rental shall be placed among its proper expenses, in estimating which proof is not clear but that a small portion of this land was actually and necessarily occupied by plaintiff in operating its gas plant. But I am not able to determine from the proof what part and value, if any,

was thus occupied. This rental, as given in plaintiff's proof, was in 1891 and 1892 $2,502.95; in 1893, $2,428.76; and in 1894, $2,184.91. If these items are disallowed in gross, such disallowance would reduce the actual cost, as given by plaintiff, nearly 5 cents per 1,000 feet in 1891 and 1892, and nearly 4 cents in 1894; thus bringing the cost, in plaintiff's proof, to $1 (about) in 1891, and to 89 cents (about) in 1894.

Turning to the testimony of the experts who testified on behalf of plaintiff as to what, in their judgment, is, or should be, the actual cost in Des Moines of manufacturing and distributing gas, we have the following results: Butterworth, 88 to 94 cents per 1,000 feet; Cowdery, 90 to 98 cents per 1,000 feet; Harper, 90 to 95 cents per 1,000 feet; White, 90 to 95 cents per 1,000 feet; Faber, 90 to 95 cents per 1,000 feet; Wallbridge, 90 to 95 cents per 1,000 feet; Chollar, 92 to 96 cents per 1,000 feet. I will not attempt recapitulation of the evidence of other witnesses, who placed the cost yet lower (some of that evidence bears marked indication of mere speculation on the subject), but will, for present purposes, take 90 cents as the cost per 1,000, in the belief that, under the proof thus far presented, this will be sustained as a fair estimate, and as not below the cost. The proof introduced by plaintiff shows that about 70 per cent. of the gas sold by it was at illuminating gas rates, and about 30 per cent. at fuel gas rates. Applying this percentage to the net rates of the 1895 ordinance, we have each 1,000 feet of gas bringing $1.21 per 1,000 feet. At a cost of 90 cents per 1,000, there will remain 31 cents per 1,000 of profit, or, at the output for 1894, a profit of $17,546. If we now take the cost of reproduction of plaintiff's gas plant, as hereinbefore found, the per cent. of profits on output for 1894, at the 1895 ordinance rates is .0438, or 4 per cent. on cost of reproducing such plant. Under the present state of the proof, I am not satisfied that any allowance should be made on the present hearing for interest on outstanding bonds. The evidence hereafter presented may convince me that this interest, or some part thereof, should be included, in determining what are reasonable rates herein.

It is insisted by defendant that the reduction in price of gas will work a corresponding and large increase in amount consumed, resulting in increase of net profits as well. That some increase in consumption will follow reduction in price, plaintiff admits, but insists that there is no basis for believing such increase will be large, or that the net profits will increase at all. What will be the amount or per cent. of increase in consumption, and whether any increase in profits will result from reduction of rates, is, and must at present be, an uncertain matter. In Railway Co. v. Wellman, 143 U. S. 343, 12 Sup. Ct. 400, Mr. Justice Brewer inquires:

"Must it be declared, as matter of law, that a reduction of rates necessarily diminishes income? May it not be possible-indeed, does not all experience suggest the probability-that a reduction of rates will increase the amount of business, and therefore the earnings? At any rate, must the court assume that it has no such effect, and, ignoring all other considerations, hold, as a matter of law, that a reduction of rates necessarily diminishes the earnings?"