192 VALUATION, DEPRECIATION AND THE RATE-BASE
particularly in the matter of adjusting the amount which annu-
ally goes into the replacement fund to the amount found, by
actual experience, to be necessary for any special plant. This
method, when selected for a new plant, also has the advantage
over other methods that the required earnings in the early
years are less than those estimated by any of the others. It
will therefore show for the same amount of earnings a smaller
annual loss or a larger annual profit in the early years than the
other methods.
Careful investigation might show that the Unlimited Life
Method is but an old method under a new name. Industrial
establishments and public utilities could without doubt be
found which had been operating in substantial conformity with
this procedure before they came under control of public service
commissions. As the method is theoretically sound and has
weighty advantages in its favor both from the standpoint of
the rate-payer who wants the burden light in the early years
of the utility’s life and of the owner who wants his invest-
ment protected without the uncertainty and confusion of present
value considerations, it seems probable that it may come into
general favor despite the present-day leaning of the public
service commissions and the courts in another direction.
A good illustration of the difficulty of dealing with depreciat-
ing property and of the undesirability of using-depreciated or
remaining value of physical property in the rate-base will be
found in the general principles enunciated by the Engineering
Board, Division of Valuation, Interstate Commerce Commission,
as submitted to the Commission in November, 1915. The Board
lays down the following general rules:
‘“ When depreciating property under the several accounts, the
following general rules shall apply:
“1. Ordinarily, service condition per cent shall be the ratio
between the remaining service life and the total service life.
When the depreciation of an item of property is based upon the
weighted average of the parts, the service condition of each part
shall be determined by this ratio.
