HALBERT P. GILETTE, M. AM. SOC. C. E. (by letter).—In common with others who have written on the subject of appraisals, the author omits consideration of one of the most important elements of the cost of producing the property of a public service corporation, namely, the development expense. Development expense is the deficit in "fair return" on the investment during the early years of operation, while the business is being developed to a point that will yield a "fair return" on the investment. Unless this development expense is charged to the capital account as fast as it occurs each year, it should draw compound interest up to the end of the development period. Development expense might be regarded as a part of the non-physical value of a plant, and a few years ago the writer so regarded it. Latterly, however, he has come to see that it does not differ one iota in principle from "interest during construction," and, therefore, is properly a part of the cost of production or of reproduction of the property. During the construction period, interest on the investment is charged, and properly so, as a part of the physical cost. Does this interest cease the day after operation begins? Not a whit. The owners of the property are entitled to a fair interest—a "fair return"—on their money, from the day it is invested. At first they receive it in the form of "interest during construction," which is charged to capital account. After operation begins they must either be allowed to earn more than a "fair return" during the fat years following the development period, or the deficit below a fair return incurred during the development period must be treated exactly like "interest during construction" and added to the capital account. If public service corporation managers have chosen the first of these two methods, it does not relieve the appraiser of the duty of adopting the second method; for the object of appraisals for rate-making purposes is to limit capital to a "fair return" on the investment. In brief, if there are to be no "fat years," then every "lean year" must be credited with its deficit as fast as it occurs. This, the writer concedes, is a radical departure from such precedent as already exists, but we must not overlook the fact that we of to-day are establishing the precedents for appraisals in the future. The whole matter of valuations for rate-making purposes is still in a nebulous form, as far as the public, and indeed, as far as the Courts, are concerned. In the end it will devolve upon engineers to establish logical methods of appraisal. To do so, they must be able to look on the problem both as engineers and as jurists. Up to the present, however, this broadness of vision has not characterized most engineering appraisers, nor is it to be wondered at when the Courts themselves are in a maze.