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 , Comments on Value and Depreciation by the Wisconsin Railroad Commission. — Substantial recognition of the principle that present value is not a proper rate-base is found in the findings of the Wisconsin Railroad Commission in the case of the Superior Commercial Club vs. Duluth Street Railway Co. (Wis. R. C. R,, 1912, Vol. 11, p. 1 to 21). The Commission makes the following statement: “ A valuation of the physical property of the Superior division of the company as of June 30, 1911, showed a cost new of $717,538 and a present value of $487,236. When the present value of the physical property of 1911 is increased by the pres- ent value of that part of the property located in Duluth, but chargeable to Superior and which cannot greatly exceed $70,000, when additions of about $10,000 are made for working capital and when proper allowances for depreciation and going value are added, it will be found that the total amount does not quite reach the cost value new. In fact, it does not greatly exceed $700,000. This sum finds support in the cost of reproduction of the plant and the business as well as in their original cost. . . . As under normal conditions investors are entitled to have their property or investment kept intact, it follows that the amounts, which have been properly set aside for such pur- poses or for depreciation, in accordance with the provisions of the law and the rules of the Commission, should in the instant case be included in the amount on which returns are allowed. On the other hand amounts earned for depreciation but with- drawn or used for other purposes than provided by law should not be so included.” Again in the case of the Stevens Point Lighting Co. relating to service and rates the Commission says (Wis. R. C. R., Vol. 14, p- 364): ““ The failure of a utility to make allowance for depreciation if the earnings have been sufficient is tantamount to a with- drawal of capital from the business and the cost of reproduction new must be diminished in determining the fair value upon which the reasonable return allowed is to be based when an adequate reserve for depreciation has not been provided. The utility is, however, entitled to earn an amount sufficient to off- set future depreciation.” 150

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