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 295 for hazard and for the unearned increment, the obligation of the public to the owner of the utility is not yet fully discharged. There should be compensation for management. It is not enough to allow the bare salaries of those who are entrusted with the management and operation. The owner is entitled to some- thing more. He has brought into being and has placed at the service of the community, an effective organization, the stability and efficiency of which is guaranteed, as in the case of a corpora- tion owner, by the character, judgment and business experience of a board of directors selected by the stockholders. The exist- ence of the corporation, the business ability of its directors resulting in the energetic control of its affairs, the cash contribu- tion by stockholders, the successful operation of the enterprise, or, in the case of the new venture, the implied guarantee of success, afford the basis for making loans and extend the ability of the public to enjoy transportation facilities or electric service, or gas and water supplies that might otherwise long be out of reach by reason of the limited borrowing capacity and lack of business ability of municipal organizations. Volume of Business to be Considered. — That there should be something in the earnings as compensation for management can hardly be questioned. There will, however, be difficulty in bringing the same into a satisfactory relation to the rate-base. This is equally true of the allowance which should be made for the participation in the general prosperity and is true to a less extent of the hazard allowance. All of these elements which should be covered in the earnings are more closely related to the volume of business than to the capital invested in the enterprise or to any rate-base built up from “ value.” It happens occasionally that a public utility concern does a large volume of business on a small investment. Some of the express companies belong in this class. The case may readily be conceived, of such a concern which rents its office facilities and operates under contract with railroad and steamship companies and which, outside of its trucks and other vehicles for local de- livery, has made no investment of any moment. It would be

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