70 VALUATION, DEPRECIATION AND THE RATE-BASE 
capitalization of any franchise or the right to own, operate or 
enjoy any franchise whatsoever in excess of the amount (ex- 
clusive of any tax or annual charge) actually paid to the State 
or to a political subdivision thereof as the consideration for the 
grant of such franchise.” 
Appreciation and the Unearned Increment 
Earnings Affect Value. — The earning power of a property 
determines its value. As its net earnings increase, its value in- 
creases. The earning power of public utilities, as a general rule, 
if rates remain undisturbed, increases as population density in- 
creases although not in the same ratio. The appreciation or 
increase of value which results when net earnings, in their rela- 
tion to the investment, are increasing is the reverse of depre- 
ciation, but it follows no definite law and it cannot be forecast 
with that degree of certainty which can, with some reason, be 
claimed for depreciation. 
The Unearned Increment. — Appreciation or increase of 
value without increase of investment is the unearned increment 
which results from the changing conditions of environment. 
Usefulness in service does not always decrease, but may increase 
with age. This may be the case with a dam or with a railway 
embankment, and this increase of usefulness when it can be ex- 
pressed in terms of money, or value in exchange, represents 
appreciation. 
Increase in the price of labor and materials, or a change in 
the conditions under which an enterprise was first established, 
may add to or may take from its value according to whether it 
would be more or less expensive to construct and establish the 
same enterprise under the altered conditions. 
As a general proposition, it may be stated that values as ex- 
pressed in terms of money are increasing. It is also true that, 
as a general rule, public utilities are to be included among the 
principal factors which are responsible for the growth of the 
community, and that, when viewed in this light, the owner of 
the utility is entitled to participate in the unearned increment