THE FIXING OF RATES iy 
the amount of the investment properly determined is made the 
rate-base. 
In the other case the amounts earned as depreciation and re- 
maining unexpended are considered as being applied to the re- 
tirement of capital, in which event the rate-base is the properly 
invested capital less the accrued depreciation (it being assumed 
that current depreciation has actually at all times been earned 
and collected). 
These two views have led to various procedures when the fair 
earnings of a public utility are to be determined — these will be 
given further attention in following pages. 
The late Commissioner J. W. Eshleman, in writing the deci- 
sion of the Railroad Commission of California in the matter of 
the application of James A. Murray and Edward Fletcher for an 
increase of water rates in the county of San Diego, Cal., says: 
“My own view is that the nearest and fairest approximation 
which may be made to a correct © value ’ upon which a public 
utility shall be allowed to earn is the amount of the investment 
wisely made, and this view is not at all in conflict with the 
position of the courts in this regard.” The Commissioner as 
appears from this statement recognizes the desirability of mak- 
ing ““ investment ” and not “ value ” the basis of the calculation 
but apparently feels the necessity of reconciling the use of the 
amount invested with the decisions of the courts, which, for the 
most part, still hold “ value ” to be the starting point. 
Factors to be Considered in Establishing the Rate-base. — 
In determining what should be regarded as the legitimate rea- 
sonable investment in any public utility to serve as a basis for 
computing rates, some consideration may be given to certain 
factors which aid in determining what the value of the property 
resulting from net earnings should be. Such factors are the 
capitalization of the business enterprise, the original cost, the 
cost of reproduction new, the depreciated or present value, 
the taxation value and the reasonable charge for the service 
rendered. There should be taken into account, too, in the 
broad problem of determining net earnings, the past history, 
id