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 I. Introduction and general notes

Collection:: Economics Books

INTRODUCTION AND GENERAL NOTES 5 problem to deal with. Depreciation enters into the cost of pro- duction and must be covered in the sale price if there is to be any profit. The cost of the perishable parts of the plant which are consumed, just as fuel is consumed though at a slower rate, must be recovered sooner or later. Definition of Terms. — The definitions of terms, herein pre- sented, relate to the sense in which these terms are used in this volume. There is not yet any perfect agreement among en- gineers and accountants relating to all of these terms and, as time goes on, some modification of terms or of the definitions of terms is to be expected. These definitions are therefore offered with due appreciation of the fact that some of them may not survive and that others remain subject to modification. The Agency Theory. — Every owner of a public service prop- erty is in a certain sense the agent of the rate-payer. If re- garded as such agent he is under obligation to render the service which he has engaged to perform in a satisfactory manner; he is entitled to protection against unreasonable competition, and he is entitled to protection of his investment, provided, of course, that the investment is a proper and reasonable one. There may be some cases, however, where unwise investments have been made, and others where part compensation for making the in- vestment has been found in the increased value of real estate or other property, perhaps not connected with the utility but owned by the same individuals who own the utility, and in such cases the value of the service rendered to the public may bear an unusual relation to the investment. Thus an irrigation canal, which was constructed to develop a region of little or no value without water, when considered by itself, apart from the land which it irrigates, may have cost so much that the service charges cannot be made high enough to yield a revenue on its cost. And yet the canal was justified, though perhaps not as a separate venture. In such cases a transfer of the canal to the land owner would be appropriate in order that the question of a reasonable return on invested capital might be eliminated, or as an alternative a bonus charge

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