212 VALUATION, DEPRECIATION AND THE RATE-BASE 
The Free Grant of Water-Rights in Western States. — The 
right to appropriate flowing water and to put the same to bene- 
ficial use is given by law, in most of the Western states, to any 
one who will construct proper works for the development of 
the water and for its transmission to places of use. The water 
of the stream belongs to the public. The grant of the right 
to put it to some beneficial use is on a par with a franchise 
to construct a highway or to build a railroad. This right has 
value as a franchise has value when the earnings are sufficient 
to create a value. As in the case of a franchise, so in the case 
of the water-right, the cost thereof becomes a part of the rate- 
base in the event that investment and not value be made the 
starting point. 
Determination of the Water-right Value. — The courts and 
the rate-fixing authorities accepting the view of the public are 
showing a tendency to allow earnings which will give the water- 
right value. But neither the courts, nor public service com- 
missions, nor experts have yet agreed upon any method of 
determining the water-right value. The method of ascertaining 
the water-right value, in the case of water used to supply the 
needs of an urban population, by comparison with the ordinary 
cost of developing water in the same region in like amount, of like 
quality and under similar conditions of delivery has occasionally 
been applied but not with entirely satisfactory results. 
To illustrate, let it be assumed that the average ordinary 
cost of making water for domestic use available for distribution, 
in the region in which a water-right is to be valued, is 10 cents 
per 1000 gallons. This cost is here supposed to include interest 
on the investment and the outlay of whatever nature connected 
with operation. Let it be further assumed that the cost of 
making available the water which is to be valued has been found 
to be g cents per tooo gallons. It will readily be seen that 
under such circumstances a rise of 1 cent per rooco gallons in the 
average regional cost of water production would have the absurd 
effect of doubling the value of the water-right. F urthermore, 
the water-right of any supply whose cost of development exceeds