THE VALUE OF WATER-RIGHTS } 
the average or ordinary cost would, under strict application of 
this test of value, prove to be a liability and not an asset. This, 
too, is an absurdity and condemns the method. 
Neither this method nor a comparison with the cost of devel- 
oping the next most available supply can be used as a dependable 
method for determining water-right values. 
In some sections of the country, as, for example, in portions of 
California, the demand for irrigation water has nearly, if not 
quite, reached the limit of supply. In such regions the depress- 
ing effect upon the value of water which results from large 
undeveloped available sources is no longer felt. The earnings 
that result from the use of the water have become the measure 
of its value and this value is consequently relatively high. 
The recognized value of water-rights in such sections has an 
effect upon the value of water-rights elsewhere and for uses other 
than irrigation. The value of water used for domestic pur- 
poses, similar general conditions being assumed, should not be 
less than that of water used for irrigation, and, if for this pur- 
pose it has a high value in one part of the state, — the question 
is asked, why not in another? Such considerations as these are 
not without effect upon the market value of water-rights. 
The fact should not be overlooked that the inclusion of a 
water-right value in the rate-base of a public service property, 
to the extent that this value exceeds cost, would be in the nature 
of an allowance to be regarded as part compensation for having 
undertaken the water development, and this compensation 
increment might reasonably be brought into some definite re- 
lation to the general cost of developing water in any region. 
Water-right Values in Relation to Cost of Works. — It has 
above been stated that the allowance of a fair reward for the 
successful development and beneficial use of water is legitimate. 
The making of a reasonable allowance, preferably based upon 
some definite percentage allowance on the ordinary regional 
cost of developing water or of developing hydro-electric power 
as the case may be, should be encouraged. If this principle 
were generally recognized, it would result in fixing with some 
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