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 IV. Essentials of value

Collection:: Economics Books

60 VALUATION, DEPRECIATION AND THE RATE-BASE franchise usually affords a definite basis for estimating its value. When the rates for service rendered or for commodity furnished are subject to regulation by public service commissions or other similar rate-fixing bodies, this is not so, at least not until rates thus regulated become dependable for a number of years and the policy to be pursued by such bodies in the discharge of their duties can be forecast with confidence. Over-capitalization. — The cases have been so frequent where exorbitant earnings, real or in some measure fictitious, have been made the basis of enormous over-capitalization of enterprises both private and quasi-public in character, that the general public leans strongly toward extreme restriction of earnings whenever the law and circumstances and the power of the rate- fixing bodies will permit of such restriction. Why allow any public utility to earn more than is ordinarily earned by a safe investment? Why allow anything for unprofitable investments even though made under good expert advice? Why take into account any lean years of the past? If the utility was not profitable or is not profitable, why should not the loss fall upon those whose poor business judgment led them into a losing venture? Such questions and others of similar character de- serve serious consideration when rates are to be established, which are to be fair alike to the owner and to the rate-payer. Kansas City Water-Works Case and Intangible Value.— Justice Brewer, in stating the conclusions of the Court in the Kansas City Water-Works Case (Circuit Court of Appeals, Eighth Cir- cuit, July 2, 1894, 62 Feb. Rep. 853), says: “ A completed system of waterworks, such as the company has, without a single connection between the pipes in the streets and the buildings of the city, would be a property of much less value than that system connected, as it is, with so many build- ings, and earning, in consequence thereof, the money which it does earn. The fact that it is a system in operation, not only with a capacity to supply the city, but actually supplying many buildings in the city — not only with a capacity to earn but actually earning — makes it true that ‘the fair and equitable value ’ is something in excess of the cost of reproduction. The

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