CHAPTER IX 
POSSIBLE PROCEDURES WHEN THE RATES FOR 
A PUBLIC SERVICE ARE TO BE FIXED 
The Prime Consideration. — When a method of procedure is 
to be selected under which the necessary earnings of a public 
utility are to be determined, the first consideration will be the 
fairness of this procedure both to the rate-payer and to the 
owner of the utility. Although there are various methods of 
procedure which have been adopted throughout the country, 
and which may be shown to be correct under various restric- 
tions as to application and under the assumption that their 
application is continuous from the beginning, it will not do to 
accept any particular one as equitable or advisable in every 
case. 
It is elsewhere shown that when capital is assumed to be 
retired at a rate which keeps pace with theoretical depreciation, 
serious consideration must be given to the departure of actual 
life from the probable life of the various parts of the utility 
which have a limited period of serviceability. It is made clear 
that a proper accounting system must be adhered to and that a 
change of procedure may result to the disadvantage either of 
the owner or of the rate-payer. 
The Preferable Method of Procedure. — Apart from the fair- 
ness which is essential, the adopted method of procedure should 
not impose unnecessary burdens upon either party. That 
method which requires the least earnings in the early years of 
their life will be preferable in the case of newly established 
enterprises. In the case of properties that have been long in use, 
past history must be taken into account, as it will not do to 
arbitrarily assume that the business has been a profitable one 
from the beginning. The presumption should rather be the 
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