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I b). The "allowable rate of return"shall be 6-1/2`n during cal- endar years when the Company's average cost of long-term debt increase in the debt capital ratio shave GO''F. In such event the 50`F capital at the beginning of the current year is not less than 3-1/2% aa'eighting of the original plant cost will be increased by each per- nor greater than 4-1/2%. Long-term debt shall consist of all debt tentage- point that the weighting of "reproduction cost new" plant due over one year after date of issue. The average cost of long. is dccrca-1. term debt shall be the weighted average effective cost of the out. standing long-term debt at the beginning of the current year. The (c). "Reproduction cost new" shall consist of the sum of the effective cost of each debt issue shall be computed by dividing following amounts: the product of the interest rate. and principal amount issued by the net proceeds of the issue. The net proceeds of an issue shall con- (1) The anginal cost at the beginning of the preceding, sist of the principal amount plus any premiums received, less any - calendar year of all plant classified as Intangible Plant. discounts and issuance expense, and less call premiums when any Land and Lund Rights,and General Plant.excluding Struc- refunding of an issue results in a lower effective cost of debt. tures and Improvements. Whenever there is a decrease in the Company's average cost of (2) The original cost at the beginning of the preceding long-term debt capital below 3-1/2% or an increase above 4-1'2%, the "allowable rate of return" of 6-1/2`r shall be decreased or in- calendar rear of till other plant trended to reflect the Hand creased by 50%of such decrease or increase. Thereafter,any contra R'h itman Index of Public Utility Construction Costs (North Central Division)as of July I prior to the current calendar move in the average cost of long-term debt capital will require the rear. Each plant account shall be trended by use of the - reverse adjustment in the "allowable rate of return". No change in following indexes: the "allowable rate of return" shall be made unless the decrease or increase in the average cost of long-term debt capital shall equal at least 1/10 of one percentage point, and in no event shall Plant Account Index the decrease or increase in the "allowable rate of return" be other All Manufactured Gas Produc- Total Construction and than in multiples of 1/20 of one percentage point. ton Plant excluding Land Equipment (Manufactured (c). The "allowable rate base" shall be the sum of the "fair and Land Rights Gas) value of the suburban area utility plant" used and useful in the Distribution Plant public service as provided in Subsections (d), (e) and M and work- - Structures and Improvements Structures and Improvements ing capital as provided in Section 5. less average contributions in Mains -Steel Maine-Steel aid of construction and average cash advances for construction, as Mains -Cost Iron %loins -Steel Iron reflected on the Company's books. Pumping and Regulating Mechanical Equipment exclu- (d). The "fair value of the suburban area utility plant" shall Equipment sive of Gas holders be the sum of 50% of the overage original plant coat including the Services Services Meters deters current year net additions, less depreciation per books, computed Meter.Installations Meter Installations on a monthly basis, and 50% of the "reproduction cost new" plant house Regulators house Regulators as defined in Subsections (e) and (f), less depreciation. Deprecia- House Regulator lostolla- House Regulator lnstelle- tion of the "reproduction cost new-" plant shall be computed by the use of the ratio of the book depreciation reserve to the original tions tions plant gross cost, plus three (3)percentage points.. Other Properly on Customers' Structures and Improvements Premises The 50% weighting of the "reproduction cost new" plant shall General Plant be used as long as the Company's ratio of debt capital does not ex- Structures and Improvements Structures and Improvements ceed 60% at the beginning of the current ,year. If it exceeds 60% the 50%weighting of the "reproduction cost new"plant will be de- Any new Plant Account which may hereafter be established creased by one percentage point for every one percentage point shall be trended in accordance with the appropriate Handy- Whitman Index. 8 9