Valuation, depreciation and the rate base

Bibliographic data

Monograph

Identifikator:: 174667931X

URN:: urn:nbn:de:zbw-retromon-119897

Document type:: Monograph

Author:: Grunsky, Carl Ewald http://d-nb.info/gnd/10180959X

Title:: Valuation, depreciation and the rate base

Edition:: 2. ed., revised and extended

Place of publication:: New York

Publisher:: Wiley

Year of publication:: 1927

Scope:: X, 500 Seiten

Digitisation:: 2021

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Chapter I. Introduction and general notes

Collection:: Economics Books

12 VALUATION, DEPRECIATION AND THE RATE-BASE without deduction for depreciation his starting point in de- termining what he can afford to pay. This last case is in conformity with the requirements herein explained, that the investment in a public utility should remain, at all times, unimpaired. It is at variance with the plan ad- vocated by many and approved in various court decisions, that the appraisal for rate-fixing purposes shall fluctuate from year to year with the age and remaining service value of the perish- able elements that go to make up a public service plant. Present Value as a Starting Point. — Despite prevailing sen- timent and rulings of the public service commissions and de- cisions of the courts in favor of making ‘‘ present value’ the starting point when rates are to be regulated, it will be ap- parent to the student that what is estimated as ““ depreciation ” which may never have been earned and collected has not neces- sarily been a repayment of capital and that therefore “ present value ” is not always the best starting point. The wisdom of starting with present value ”” or with “ value ” in any form may well be questioned because value is a result of assured earnings and such values as are not covered by the invest- ment do not exist until the earnings create them. In appraising for rate-fixing purposes the aim should be to make the legitimate investment and not the depreciated value the rate-base. It is sometimes difficult to modify the “fair value” basis of rates as heretofore insisted upon by the courts so that it will fit local conditions as in the following illustrations: 1. Adjacent to the built-up section of a community which is being supplied with water at satisfactory and in every way equitable rates, a large subdivision of acre property is being made. Streets have been laid out and paved, sidewalks have been constructed, an adequate sewer system has been provided and a system of water mains has been constructed. These water mains conform in every respect to the requirements of the owner of the water-works to whom this system of mains is now offered on the sole condition that he supply prospective customers with water.

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