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.

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Document type:: Monograph

Structure type:: Chapter

Title:: Chapter V. Elements which reduce value

Collection:: Economics Books

8o VALUATION, DEPRECIATION AND THE RATE-BASE requirements and so far in excess of a reasonable allowance for growth in the near future that it must be regarded as overbuilt and not, therefore, entitled to be taken into account at its full cost. Without attempting a full discussion of all of these factors which must be brought under review by an appraiser, particularly when the establishment of a rate-base is involved, attention will be given briefly to property not required for immediate use, and this will be followed by a discussion of depreciation includ- ing some matter relating to amortization and the replacement requirement, here conveniently considered though not all strictly pertaining to reduction of value. The Overbuilt Plant and Property not Required for Immediate Use Plant Capacity in Relation to Requirement. — Ordinarily, and with good reason, public utilities are constructed of a capacity for service somewhat in excess of immediate requirements. It is customary in anticipation of the increased demand for service which comes with the growth of the community to give the utility ample capacity. A part of the utility plant is built, in other words, to meet the demands of the future rate-payer. The question may well be asked to what extent this is justified and to what extent the rate-payer of today should be made to bear a burden for the benefit of the rate-payer of tomorrow. Prudent foresight in such matters is always commendable. It should be exercised by the private owner just as it would be exercised by wisely managed municipal public utility depart- ments. Future requirements should be foreseen and provision should be made for expansion of works. This may sometimes require the acquisition of lands, of rights of way, of water- rights, of reservoir sites, and the construction of works beyond immediate requirements. Outlays in this direction, within limits, are generally more economical than deferred acquisition or deferred construction, at the advanced value of land and the higher cost of construction of the future.

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