122 VALUATION, DEPRECIATION AND THE RATE-BASE
The legitimate and always applicable method of procedure
when public utility rates are to be fixed, is that which the author
calls the Unlimited Life Method. This does not involve any
estimate of accrued depreciation, and only reasonable care in
determining the annual replacement requirement. The replacement
 fund is kept apart and if error has been made in the assumption
 of the life of the items and the fund becomes either
too large, or inadequate, the necessary correction can be applied
in subsequent years.