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 XVI. The rate-base and depreciation in recent decisions of the U.S. Supreme Court

Collection:: Economics Books

312 VALUATION, DEPRECIATION AND THE RATE-BASE tial life, or that the capital invested in it was being consumed, because neither is true. “In order to justify the deduction of ‘theoretical deprecia- tion,” I was asked in this case to assume that ‘a depreciation reserve ’ equal to the computed ‘ theoretical depreciation ’ had been collected from the public, and then to deduct from the company’s investment the amount of such assumed reserve. No such reserve had, in fact, been collected or accumulated by this company. The rate chargeable did not permit it, and there is no reason to believe that the Legislature, in prescribing the rate, ever contemplated it. As I have set forth in findings Nos. 32 and 27 of my report, and as I have elsewhere indicated herein, the complainant gas company has maintained its property and investment intact in the past, through renewals and replace- ments at an average actual cost of approximately .3 cent per 1000 cubic feet of gas sold, and no reason appears for believing that it cannot continue to do so on that basis. Even assuming that the statute permitted such a rate, to have imposed on the company’s consumers an additional burden nearly twice as great, representing a purely theoretical item of operating cost, merely to accumulate a useless reserve to justify a drastic deduction from investment in some ultimate proceeding as to rates, could not have been justified on any sound theory in the past, and cannot now be sustained as to the future. “In order to justify the assumption that a ‘depreciation reserve > was or should have been collected, defendants’ witness Hine testified in this case that such a reserve was necessary, ‘ so that when the property is retired for any cause whatsoever the fund can be charged with the cost of the property.” He testified, also, that the reserve should be in his opinion ‘ invested in the property,” and that when the funds were needed for renewals and replacements they would be provided °by issuing securities against construction work which had been done originally out of this fund, for the money laid aside for this fund, just to reimburse the treasury on account of these expenditures.’ This view seemed to me to disregard the obvious fact that, having deducted the amount of the reserve temporarily invested in property from that on which he proposed the company should be allowed to earn a return, he, to all intents and purposes, destroyed the earning power of such property, and investment; that therefore he could not issue any securities against such property, there being no earnings therefrom with which to pay interest on the securities: that the reserve could never thereafter be availed of

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