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

154 VALUATION, DEPRECIATION AND THE RATE-BASE ordinary operating expenses (including depreciation) and these years are generally followed by others in which the return is not commensurate with what the investment should earn. The deficiency in the earnings of the early years in the case of any legitimate public utility should be made good to its owner in some way at some time. This may be done by treating any ascertainable deficiency in the earnings as a permanent invest- ment representing cost of establishing the business or by mak- ing suitable provision to amortize it in a reasonable time. When, therefore, the appraisal of a rate-base or the fixing of rates for a long-established public utility is in question, it should be as- sumed to be quite as likely that past history will show a defi- ciency as that it will show an excess of earnings over what should be considered a reasonable return. It follows that past history relating to insufficient earnings should be brought under review and that there may be cases in which the contrary opinion of the U. S. Supreme Court, as expressed in the case of Knoxville vs. Knoxville Water Company (212 U. S., p. 14) (29 Sup. Ct. Rep., p. 148), does not strictly apply. In this case, quoted at greater length on p. 134, the Court says: “ Tf, however, a company fails to perform this plain duty and to exact sufficient returns to keep the investment unimpaired, whether this is the result of unwarranted dividends upon over- issues of securities, or of omission to exact proper prices for the output, the fault is its own.” The omission to exact prices for the output that would keep the investment unimpaired may be due to the fact that the service rates necessary to accomplish this would have been greater than the service would bear. The failure to secure ade- quate earnings is not always the fault of the owner of the prop- erty. It may even be the deliberate program to let the ample returns of future years make good the early deficiency as, for ex- ample, when the Unlimited Life Method of procedure is adopted. In the Kennebec Water District Case (97 Maine 185; 54 Atlantic 6) the Court in its instructions to the appraisers of the properties of the Maine Water Co. said:

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