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 2 “ The reasonableness of the rate may also be affected, for a time, by the degree of hazard to which the original enterprise was naturally subjected; that is, such hazard only as may have been justly contemplated by those who made the original in- vestment, but not unforeseen or emergent risks. And such allowance may be made as is demanded by an ample and fair public policy. If allowance be sought on account of this ele- ment, it would be permissible at the same time to inquire to what extent the company has already received income at rates in excess of what would otherwise be reasonable, and thus has already received compensation for this hazard.” Earnings in Relation to the Rate-base and to the Volume of Business. — If it can be accomplished without making rates un- reasonable, there should be not only an interest allowance upon the rate-base equal to the current rate on money invested in industrial and related enterprises, preferably about 6 per cent per annum, but also some additional allowance, perhaps gener- ally less than 5 per cent, unless conditions are unusual, as a reasonable participation in the general prosperity of the com- munity (this in lieu of appreciation), plus some percentage al- lowance on the reasonable cost of operation (not including in this cost the interest on the invested capital). This latter allowance should, perhaps, be so graded that it will be small when the investment is large in relation to cost of operation and that it will approach 10 per cent or, in some cases, be even more, if the investment in relation to the cost of operation is small. The objection which may be urged to such an arrange- ment, that it will make it to the interest of the owner to inflate the cost of operation, is to be weighed against the danger of discouraging investment in public utilities if any less liberal policy is pursued. Moreover, under the control which is now exercised over the public utility by the public service commis- sions, this objection will lose much of the force which it might otherwise have. The capitalization of the percentage allowance on the cost of operation, plus any other allowance (except amortization) in excess of a fair interest on the investment, will represent the 163

Access restriction

Copyright

fullscreen: Valuation, depreciation and the rate base

Monograph

Chapter

Table of contents

Download

Monograph

Chapter

This page

Image fragment

Citation links

Citation recommendation