CAMPBELL, J. This is a case involving two appeals from the action of the state Corporation Commission fixing the water rates to be charged the inhabitants of the city of Roanoke by the water company.
The questions involved in the first appeal were before this court on an appeal granted February 28, 1923.
On September 20, 1923, Kelly, P., delivered the opinion of the court affirming the action of the Commission in part, and remanding the case to the Commission to state, as provided by section 156f of the Constitution, "the facts and reasons upon which the Commission based its action as to (1) the appreciation of values over pre-war unit prices, (2) water rights, and (3) going value, " and retained the case on the docket of this court.
In this decision, which is reported in 137 Va. 348, 119 S. E. 268, the learned judge deals most elaborately with the questions of "valuation for rate-making purposes"; "water and waterworks"; "rate fixing"; "valuation"; "present value theory"; "weight to be given to Commission's decisions on appeal"; "valuation of property"; "cost of obtaining a substitute supply"; "reasonableness of return of 7 per cent, on investment"; "prudent investment theory"; "appreciation and depreciation"; "valuation based on reproduction or replacement of plant"; "water rights value"; "other items of value"; "accrued depreciation"; "going value"; "working capital and supplies"; "deficiency in earnings"; and "pre-war unit prices." After so masterful a discussion of these most complex questions by the distinguished former president of this court (Judge Kelly resigned January, 1924), a further discussion thereof on our part would be "an affectation of erudition."
In obedience to the remand order of this court the Corporation Commission, on the 21st day of March, 1924, after having heard evidence upon the three questions stated, supra, certified to the Supreme Court of Appeals the facts and evidence upon which the action of the Commission in the said proceedings was based, together with its opinion, which is as follows:
"Facts and reasons in pursuance of section 156f of the Constitution of Virginia and the conclusions of the Commission under the order of the Supreme Court of Appeals entered September 20, 1923, remanding the case for further proceedings.
"To the Supreme Court of Appeals:
"The Commission, n? its opinion o£ August 31, 1922, in concluding the discussion of the value of the water rights of the Roanoke Waterworks Company, summarized the situation as follows:
' 'Prom all authorities the determination of the amount of water rights value is stated to be a matter of judgment. The Commission takes as a basis the cost of purifying the amount of water used during the year 1921, which, capitalized at 9 per cent., gives a valuation of $199,540. Accordingly we allow a valuation of $200;000 for the water rights.'
"The Supreme Court of Appeals in remanding the case quoted the above paragraph, and said:
" 'It is clear from the concluding portion of this extract from the opinion that the Commission has made no allowance for pumping equipment installed since the 1913 appraisement, and none on account of the fact that since that appraisement conditions have arisen which would make a substitute supply from Roanoke river cost much more than it would have cost at that time. The appraisers in 1913 adopted the cost of such substitution as the measure of value. The effect of what the Commission has done, as we understand it, is to adopt the same measure of value which the appraisers adopted in 1913, but without making any allowance for changed conditions.'
"It is evident that the Supreme Court understood that the Commission based its valuation on the full cost of a substitute supply from Roanoke river, since it said:
" 'So far as we are able to understand, the Commission in effect has adopted as the measure of value of the water rights the cost of purifying the water.'
"On the contrary, the Commission meant by the expression 'cost of purifying' to include only the operating expenses of a substitute filtration plant and not the fixed charges connected therewith and included in the appraisal of 1913 made by Mr. Maury. The Commission used a basis of $9.S0 per M for this purpose, and arrived at an operating expense amounting to $15,903 for 1, 026, 000 M gallons, the 1921 usage. Capitalizing this at 8 per cent., the Commission arrived at a valuation of $199,540, and allowed a value to water rights amounting to $200,000.
"Since the 1922 hearing, the water company has filed exhibits showing detailed analyses of water 'taken from Roanoke river and the operating expenses of a filtration plant based upon these analyses of $12.00 per M gallons, including taxes. We think these figures should be accepted as correct, and used in place of the $9 SO used by the Commission in its opinion of August 31. 1922.
"Upon the basis of these figures and the Commission's method the value of the water rights will be found as follows;
"1, 626, 000 M Gals, x $12.60 equals $20,488, which, capitalized at 8 per cent., gives $256,-100.
"While the Supreme Court understood the Commission in its former opinion 'adopted as a measure of value of the water rights the cost of purifying (operating expenses and fixed charges included) the water, ' it added:
" 'We do not perceive any reason for adopting this method, except that the appraisers in 1913 adopted it in order to determine what a
substitute supply from the Roanoke river would cost.' "The board of appraisers in 1913 allowed a
valuation of $200,000 for water rights (page 17, appraisers' report) arrived at as follows:
"Description:
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| |Annual Yield |Value Per |Total |Annual Value Capitalized at 8%|
| |Mil. Gal. |Mil. Gal. |Annual |or Water Rights Val. |
| | | |Val. | |
|---------|-------------|-----------|----------|------------------------------|
|Crystal |1, 460 |$9.00 |$13,140 |$164,250 |
|spring | | | | |
|---------|-------------|-----------|----------|------------------------------|
|Muse |474 |5.00 |2, 370 |29, 625 |
|spring | | | | |
|---------|-------------|-----------|----------|------------------------------|
|River |217 |2.50 |535 |6, 687 $200,562 |
|spring | | | | |
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" 'Accordingly the appraisers find the aggregate value of the water rights of the Crystal, Muse, and River springs to be in round numbers $200,000.'
"In 1920 Dabney H. Maury, the company's witness, who was a member of the board of appraisers in 1913, stated that in his opinion the 1913 value should have been $140,000, and increased this amount by 70 per cent, to give $238,000 as the average value during the five years ending March 1, 1920. In 1922 this value was increased by company's witness Moore to $593,487, due to the necessity having arisen, the company claimed, of having to secure this water from the Roanoke river at a point above Salem.
"Since the 1922 hearing the company has further increased this claim to $1,522, 253; the increase being caused by a corrected estimate as to the cost of a substitute supply from a point above Salem.
"While the company's claim depends upon the necessity of securing the substitute supply from the Roanoke river at a point above Salem and upon the proof that the supply described by the exhibits would constitute the cheapest substitute, it appears that the project as proposed shows 'insufficient consideration to the fact that
a water supply works located on — the
Roanoke river would entail a design of a distribution system, reservoirs, and water supply works different from those of the present waterworks, when furnishing substantially an identical water service throughout the city, and that when thus worked out would give different values for comparison, and would lead to different results' than those submitted by the company. This was the view held by the appraisers in 1913 relative to this method (see page 15). Furthermore, no consideration is given to the fact that any plant located at Salem would almost certainly supply other consumers than those in the city of Roanoke. Thus, the substitute supply urged by the company has not been definitely proved to be the cheapest one.
"But for the purpose of argument such a method will be considered the cheapest, and therefore, if sound, the correct basis for the valuation of the water rights.
"The facts are that the springs of the company have an estimated flow of 2, 151, 000 M gallons annually, of which amount, when last reported, the annual usage was approximately 1, 020, 000 M gallons. It appears proper that any method based upon a capitakzed savings calculation should capitalize the savings actually effected from year to year to give thevaluation sought. Otherwise, the savings calculated by using the full flow of the springs might far exceed the cost of providing from a more expensive substitute...
