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 203 The owner’s share in this risk allowance is only a proportionate one, while the loss, when it occurs, cannot be distributed to the other utilities of the country which escape such loss, but falls in its entirety upon the one utility that may be affected thereby. In recognition of the fact that most utilities escape such losses, the usual allowance in the public utility rates for the element of risk is small and probably in most cases negligible. The allow- ance for management, for business hazards, together with the allowance for participation in the general prosperity of the country, in short the profit allowance, would probably in few, if any, cases be materially reduced, if this element of risk were entirely eliminated. In all cases in which this interpretation of the present-day procedure is substantially true, it would be unfair to an owner whose public utility plant sustains material damage by flood, by earthquake or by other fortuitous event, against which insurance is impossible, to let the entire loss fall upon him with- out recourse. That such losses should in some way ultimately fall upon those who are served by the utility seems self-evident. The most equitable procedure would be to let them be borne both by the rate-payers before the event as well as by the rate-payers of the future. But as they cannot be foreseen the practical alter- native would seem to be to let them fall in their entirety on the rate-payers of the future as would be the case if the utility were publicly and not privately owned. In the case of a business not subject to regulation the oppor- tunity to make up for past losses exists if larger profits can be made by charging what the traffic will bear. Owners of public utilities should be allowed to recoup their losses, if this can be done without making rates unreasonably high. C — Hazard, Management and the Unearned Increment The Allowance for Hazard, for the Unearned Increment and for Management Should Not be Based on Value. — All rate- regulating authorities are devoting much thought and study to

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