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 public
 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 covered
 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 burdens
 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 investment
 without deduction for depreciation. This will be the
case whenever it can be shown that past earnings were inadequate
 to permit the accumulation of a fund, out of earnings in
excess of reasonable interest on the investment, which, if it existed,
 would offset in whole or in part the so-called accrued
depreciation,

103%