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 III. Fundamental principles which control when appraisals of public service properties are to serve as a basis for fixing rates

Collection:: Economics Books

FUNDAMENTAL PRINCIPLES ) b. In amounts which increase from year to year, figured on the compound interest basis. (Equal Annual Payment Method.) ¢. In equal annual amounts which together with compound interest thereon will in the life of an article amount to its cost. (Sinking Fund Method.) 11. A public service property may be regarded as having an unlimited life. Taken as a whole when rates are to be fixed the accrued depreciation may then be disregarded; but provision must be made for the renewal of those parts which for any reason become useless. In this event there need be no repay- ment of capital, except only those portions thereof which may be regarded as temporarily invested. 12. In so far as this may be practicable, the earnings of the public utilities should be adjusted to the ability of the rate- payer to pay. Ordinarily, therefore, the aggregate earnings should be kept relatively low in the early years when the number of rate-payers is small. 13. The owner of a public utility has the right to do what he pleases with any portion of his capital which is paid back to him, which is, in other words, eliminated from the rate-base. 14. The owner of a public utility should be held accountable for all sums collected from the rate-payers for the specific purpose of making repairs and renewals. A diversion to other uses of any fund intended for this purpose is equivalent to a repayment of capital. 15. The basis of calculation, the starting point when rates are to be fixed for a public utility, is the amount of capital whose in- vestment was necessary to build the plant and develop its busi- ness and on which there should be a proper interest return to the owner. This may be either the legitimate original cost new, or it may be the properly invested capital reduced by the accom- plished amortization. This basic amount is for convenience called the “ rate-base.” 16. As a general proposition the earnings present and pro- spective should be such that they will give the property a value in excess of the capital actually (and properly) invested — the 35

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