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

36 VALUATION, DEPRECIATION AND THE RATE-BASE excess of value being the amount of the reward (including per- haps some unearned increment) to which the owner is entitled for having established and for managing the business. 17. Strategic value, resulting from a combination of circum- stances such as low operating cost and ample market for the output at prices fixed by or for competing concerns which have not the same advantage of low operating cost, is a part of the reward to which the owner of a public utility may be legitimately entitled. 18. The various procedures for estimating the required earn- ings of public service properties are usually based on the assump- tion that the same procedure has been used from the beginning of operations. A procedure which may be correct if consistently and continuously applied, may be unfair to either the owner or the rate-payer, if introduced at a later period. Consequently it should be regarded as imperative that consideration be given to past history when the rates of an operating concern are to be fixed. 10. Franchises and water-rights and in general the privilege to do business are not to be made a part of the rate-base except in certain cases in which such rights and privileges have defi- nitely ascertainable strategic value or have had to be purchased as, for example, when a city sells the right to construct and main- tain a street car system or when the acquisition of a water- right involves the purchase of adverse riparian or other rights. 20. The net earnings of a public service property should in some measure exceed the return from ordinary safe investments. 21. The prospective business must be taken into account when the rates are to be fixed particularly in the case of a new enterprise, where the rate-payers are too few at the outset to produce, at a reasonable charge for the service, the revenue which would yield a proper current return on the investment. 22. The replacement requirement is to be determined from the expectancy (remaining years of usefulness), the probable life when new of similar articles and the estimated cost of effecting the replacement. It is not dependent on original cost nor age,

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