292 VALUATION, DEPRECIATION AND THE RATE-BASE 
a fair extent, they should, in the course of time, be amortized 
out of earnings. As a rule no provision for other than ordinary 
risks is made in the allowed rate of return. Consequently, after 
a catastrophe, for which the owner is not responsible, but which 
entails a large investment of new capital to rehabilitate a public 
utility plant, there should be some provisions for amortizing the 
loss. It will, in such event, be better to let the amortization take 
place within a reasonable time rather than to carry an equiva- 
lent sum in the rate-base as though it were a permanent, though 
unproductive, interest-bearing investment. 
It will perhaps be claimed, by some, that such losses should 
not be differentiated from the ordinary losses due to unforeseen 
causes, and that whatever hazard is involved in any enterprise 
has unqualifiedly been assumed by the owner of the utility. 
Under such a theory the allowance for hazard should at all times 
be liberal enough to compensate the owner for the chance which 
he takes of at some time suffering material loss. He would be 
compelled to take the gambler’s chance and the rate-payer 
should stand the higher rate. Under such a practice there would 
be an owner here and there who would suffer large loss, while the 
great majority of owners, escaping the great catastrophes, would 
get what really should be paid, in the exceptional case, to the 
unfortunate owner. Under such a treatment of this matter, the 
tax for the risk would fall upon those who are paying rates before 
a catastrophe occurs, as well as upon those who receive service 
from the rehabilitated works. The more logical procedure would 
be to relieve the rate-payers from the burden of making the in- 
adequate provision for catastrophes which may never occur and 
letting the loss that actually results from a catastrophe be met 
out of future earnings. The usual provision for meeting losses 
which result from such fortuitous events as are here under dis- 
cussion, is inadequate. The owner does not, as in the case of 
losses which must be made good by assurance companies, get the 
full benefit of the allowance for risk which is distributed in small 
measure or is at least supposed to be distributed among all public 
utility owners and is supposed to be collected in the earnings.