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 VIII. The fixing of rates

Collection:: Economics Books

142 VALUATION, DEPRECIATION AND THE RATE-BASE some predetermined interest return on his investment, the in- centive to improve the service falls away, because, if the owner succeeds in economizing, in producing his output at a lower cost, the immediate result will be lower rates and less earnings. The gross income may be reduced though, perhaps, the value of the service to the rate-payer may remain unaffected or may even be increased. Rates should not therefore be subject to change too frequently. If there must be a term during which the established rates will apply, let it be at least 5 years. Control and Regulation. — The acceptance of the privilege to operate a public utility carries with it a submission to such regulation as may be demanded by the public which grants the privilege. This regulation must be reasonable. The public utility owner is in business for profit. He invests his capital and applies his ability and experience to the development of enterprises that would otherwise remain dormant for a longer or shorter period. He brings within reach of the community, means of transportation, an adequate water supply, light, power and heat, telegraph and telephone facilities which all contribute to the growth and prosperity of the community. He does this because he considers his enterprise a good business venture. In the case of the commercial and industrial enterprise, too, a tendency may be noted toward monopoly which is likely to lead in time to regulation and control similar to that of the public utility. Whenever the operation of any concern acquires such magnitude that it can and does destroy the business of its com- petitors, it becomes monopolistic in character and the state is bound, sooner or later, to exercise its right to regulate and con- trol not only the method of conducting business, but in the end, perhaps, the prices to be charged for its output. Excessive and Fictitious Profits. — Where, in the rapid tran- sition from a frontier region to a state with stable industrial and commercial conditions, the advance in the value of real estate has been rapid and the opportunity for profit in many lines of business has been large, the owner of the public utility has fre- quently taken advantage of the opportunity and has capitalized

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