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 VII. The purpose of the appraisal

Collection:: Economics Books

THE PURPOSE OF THE APPRAISAL J new road-bed requires more careful watching and greater ex- pense for upkeep. Consequently the net earnings are lower than they would be with the same volume of business, the same rates and a well-compacted old road-bed. If the resulting earnings are inadequate in the early years of business, the defi- ciency may be treated as a temporary investment to be amor- tized out of the larger net earnings of later years. Depreciation in the Pocatello Water Company Case. — The Supreme Court of Idaho in a recent decision (1915) in the Pocatello Water Company case, Murray vs. Public Utilities Commission (150 Poc. Rep. 47, p. 50), reversing the Public Service Commission of that State says in reference to deprecia- tion: “So far as the question of depreciation is concerned, we think deduction should be made only for actual tangible depreciation and not for theoretical depreciation, sometimes called ° accrued depreciation.” In other words, if it be demonstrated that the plant is in good operating condition and giving as good service as a new plant, then the question of depreciation may be entirely disregarded.” This decision is in substantial accord with the minority report of the Commission which had been made by A. P. Ramstedt and in which he said: “ A person having invested his money in a continuous busi- ness enterprise for the benefit of others must always be ready to replace the constructive portions of his plant as they wear out. A person having embarked on such an enterprise is justly entitled to compensation to cover this depreciation in addition to a fair return, over and above expenses, upon the reasonable value of the property. Allowance for depreciation cannot, in my judgment, be considered as profit or an earning factor in the business. ... The fact that in an investigation of the petitioner’s property . . . it is found that the market value of his physical property employed for public use has depreciated $77,188.39 does not, in my judgment, justify the commission, in its determination of a fajr value for rate purposes, to deduct the amount of depreciation from the present estimated cost of reproducing the property new, and thereby reduce the earning power of his property.” 13”

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