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

156 VALUATION, DEPRECIATION AND THE RATE-BASE may be determined from cost records while in other cases it may have to be estimated from less dependable data and as- sumptions. The rate-base should be made the basis of the calculation. The earnings present and prospective should be adequate to yield a proper return on the rate-base and they should more- over also be adequate to create some value in addition thereto which will be compensation to the owner for having established and for managing the utility and may be in lieu of appreciation which under this method of procedure would not always appear in the rate-base. The Effect of a Bonus upon the Rate-base. — Attention has already been called to the fact that when the owner has received a bonus, in order to encourage construction, the original cost to him is reduced by the amount of the bonus. This circum- stance should not be overlooked in determining the rate-base. How the bonus paid to the owner may affect the rate-base can be made clear by an illustration. The case can readily be conceived of an irrigation system constructed at an average cost of $30 per acre. The right to take water from this canal system is made the matter of contract, each land owner who takes water for a given tract paying to the canal owner a bonus of $20 per acre. When all the land within the area to be served by the canal has acquired the right to take water from the canal, the owner will be out of pocket only $10 per acre and not $30. Full justice will be done to both the owner and to the irrigator if the rate-base in this case be estimated at $10 and not at $30 per acre, due consideration being given to all other elements that should be included in the rate-base. Two Procedures may be Followed in Determining a Rate- base. — There arc two standpoints from which the matter of determining the rate-base may be approached and the proce- dure in the matter of making an appraisal which is to serve as a basis for fixing rates will vary according to the standpoint taken. In the one case, the investment is regarded as unimpaired, and no deduction is made for amortization or depreciation, and

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