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

294 VALUATION, DEPRECIATION AND THE RATE-BASE the establishment of a proper basis of calculation when the rates to be charged by public utilities are to be fixed. The highest court has said that value must be the starting point and the attempt is therefore generally made to comply with this apparent requirement of the court. The result is the use of a rate-base conforming to ‘ present value ” or to some- thing that may be called present value, even though in attempt- ing to use value as the rate-base it is occasionally found neces- sary to read new meanings into the word value. After this value has been ascertained in some fashion the owner of the utility is allowed to earn a return thereon, usually somewhat in excess of what would be a fair interest return on money for investment in enterprises of like character. When there is included in the rate-base thus established an allowance for “ going value,” the interest return allowed and earned on this increment of value together with earnings to cover the excess of the rate of return over the ordinary interest rate, is the owner’s compensation for hazards and for management and may also cover some participation in the prosperity and increas- ing values of the property in the community which is served by the utility. If the allowance for hazards has been correctly estimated, the owner will in the long run get little or no advantage therefrom, because this allowance will be offset from time to time by losses or sacrifices of various kinds. The allowance for par- ticipation in the general prosperity is not always recognized as being due to the owner for the reason that a part thereof, under the prevailing system of using value as the basis of the calcula- tion, makes its appearance in the increase of real estate values and in the increasing values resulting from the gradual but recognized rise in the price of materials and the rise in the wage scale. And yet every utility helps to create the general pros- perity. It adds to the unearned increment of the vacant lot and unused field as well as to that of the lot or field whose owner is a rate-payer. Some share of this prosperity should go to the utility, even when its property items do not include appreciating real estate. But, even when the earnings cover fair allowances

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