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

THE FIXING OF RATES iy the amount of the investment properly determined is made the rate-base. In the other case the amounts earned as depreciation and re- maining unexpended are considered as being applied to the re- tirement of capital, in which event the rate-base is the properly invested capital less the accrued depreciation (it being assumed that current depreciation has actually at all times been earned and collected). These two views have led to various procedures when the fair earnings of a public utility are to be determined — these will be given further attention in following pages. The late Commissioner J. W. Eshleman, in writing the deci- sion of the Railroad Commission of California in the matter of the application of James A. Murray and Edward Fletcher for an increase of water rates in the county of San Diego, Cal., says: “My own view is that the nearest and fairest approximation which may be made to a correct © value ’ upon which a public utility shall be allowed to earn is the amount of the investment wisely made, and this view is not at all in conflict with the position of the courts in this regard.” The Commissioner as appears from this statement recognizes the desirability of mak- ing ““ investment ” and not “ value ” the basis of the calculation but apparently feels the necessity of reconciling the use of the amount invested with the decisions of the courts, which, for the most part, still hold “ value ” to be the starting point. Factors to be Considered in Establishing the Rate-base. — In determining what should be regarded as the legitimate rea- sonable investment in any public utility to serve as a basis for computing rates, some consideration may be given to certain factors which aid in determining what the value of the property resulting from net earnings should be. Such factors are the capitalization of the business enterprise, the original cost, the cost of reproduction new, the depreciated or present value, the taxation value and the reasonable charge for the service rendered. There should be taken into account, too, in the broad problem of determining net earnings, the past history, id

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