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 XV. Elements deserving special consideration when rates are to be fixed

Collection:: Economics Books

ELEMENTS DESERVING SPECIAL CONSIDERATION 289 extremes is most likely to prove true, whether, for example, the last word has been said in the manufacture of gas and there will be no further abandonment of standard gas making appliances and processes, or whether, due to exhaustion of sources of oil, or due to other causes, there may not be found some new substitute for oil or for the gas itself which will render some of the most modern appliances of the day obsolete in the near future. Past experience in the matter of abandonment of property, due to obsolescence, is not a dependable guide to what may happen in the future. In this respect there is a difference be- tween the failures from this cause and those which result from the wear and tear of use and from the somewhat less regular failures through accidents incident to human frailty, fire and similar causes. In the one case the basis for a satisfactory pre- diction is lacking. In the other the probability of events occur- ring in the future can be predicated with some confidence upon what has occurred in the past. There is a difference, too, between replacements made as the result of obsolescence and replace- ments due to failure from other causes. In the case of obsoles- cence the replacement is made with some device which betters the service — the output costs less, or the service is made more reliable or the quality of the output is improved, while in the case of ordinary replacements or renewals the betterment of service is not a necessary incident. Treatment of Obsolescence and Replacement Compared. — It is proper to charge the rate-payer with the cost of replacement when property fails from ordinary causes and to let the earnings, therefore, cover a replacement increment during the useful life of any item of property and to base the charge on the ordinary replacement requirement as determined for such property. Not so, however, in the case of obsolescence. This will be made plain by the following considerations: There would be no obsolescence if the improved machinery or the new process which takes the place of that which is being replaced did not result in advantage to some one. If the obso- lete property has been treated as though its failure could have

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