ELEMENTS WHICH REDUCE VALUE 
sum allowance due at the time of failure if capital is to be kept 
unimpaired. 
It is perfectly reasonable, moreover, to assume, unless there 
is evidence to the contrary, that the method of estimating and 
providing for replacement requirements, which prevails in any 
case, has been introduced deliberately. The owner of the pub- 
lic service property may be perfectly willing to waive collection 
of the annuity installments if he knows that what they will 
amount to, that is, the actual annual replacement, will be cov- 
ered by the gross earnings when the time comes for discarding 
parts of his plant. In other words, he may be willing to accept 
the amount of an annuity in lieu of the annuity itself; and the 
rate-payer may desire such an arrangement, because, in the 
early days of the plant’s life, he may be unable to pay a sufficient 
amount for the service to cover the replacement annuity. It 
must be remembered, however, that such an arrangement bur- 
dens the future rate-paver to some extent for the benefit of the 
rate-payer in the early days of a plant’s life. Not more SO, 
however, than when, as is done by some appraisers, early losses 
are used as a measure of “going value.” 
It follows directly from the foregoing that even when earnings 
cover current average annual replacement requirements, the 
appraisal for rate-fixing purposes may still be the entire invest- 
ment without deduction for depreciation. This will be the 
case whenever it can be shown that past earnings were inade- 
quate to permit the accumulation of a fund, out of earnings in 
excess of reasonable interest on the investment, which, if it ex- 
isted, would offset in whole or in part the so-called accrued 
depreciation, 
103%