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 IX. Possible procedures when the rates for a public service are to be fixed

Collection:: Economics Books

168 VALUATION, DEPRECIATION AND THE RATE-BASE out (6 per cent per annum interest being again used for purposes of illustration) will be 38 per cent as shown by the formula on page 93. In other words, the remaining value of the 20 generators (cost less depreciation, as ordinarily noted) will be about 62 per cent. No purchaser would include the 20 generators in his valuation of the property at more than 62 per cent of their aggregate cost; but he would, nevertheless, and with reason, expect to be allowed to earn interest on 100 per cent of their cost new, claiming rightfully that he is entitled to the same rate of income return on unexpended annual replacement incre- ments as he is entitled to earn on the rest of his invested capital. He will justify this claim by pointing out that the earnings on any accumulated replacement fund are not available for any other use than the replacement of worn-out property; that such earnings do not, therefore, represent income; and that it is for this reason he is entitled to have the aggregate annual replace- ment allowance, together with accumulated interest, treated as interest-bearing capital. California Law Restrictions upon the Depreciation Fund. — In this connection attention may be called to the laws of Cali- fornia (Statutes of 1grz, First Extra Session, Ch. 14, Sec. 49), which prescribes that the Railroad Commission (having the duties of a public service commission): “ may from time to time ascertain and determine and by order fix the proper and adequate rates of depreciation of the several classes of property of each public service utility. Each public service utility shall conform its depreciation accounts to the rates, so ascertained, determined and fixed, and shall set aside the moneys so provided for out of earnings, and carry the same in a depreciation fund, and expend such fund only for such purposes and under such rules and regulations, both as to the original expenditures and subsequent replacement as the Commission may prescribe. The income upon investments of moneys in such fund shall likewise be carried in such fund.” It is here apparently recognized that the depreciation fund should be used for the sole purpose of replacing worn-out parts

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