218 VALUATION, DEPRECIATION AND THE RATE-BASE
only inferior uses. Where a water-right thus limited in life is to
be valued, the question not only arises as to its strategic value, but
cognizance must be taken of the fact that the life of the right
is limited and that it will not be a source of revenue for all time.
The value of any water-right, in excess of cost, like the value
of a franchise, results from earnings in excess of a fair interest
on the investment. This value is, therefore, directly dependent
upon the rates established by the rate-fixing bodies or, in the
case of the restricted franchise, upon the rates allowed to be
charged under such franchise. Large power is in the hands of
the rate-fixing authorities to make or to destroy the value of
water at its source and until a definite policy has been adopted
by such authorities, there will continue to be more or less un-
certainty relating to such value. The real value of property
of this character will, for the present, remain somewhat specu-
lative, particularly in cases where the development of the water
or of a water-power lies in an uncertain future. This can hardly
be otherwise because it is not yet certain that the tendency of
today to allow something for the water-right, practically as com-
pensation for making the development, will be adhered to.
When it is fully understood that such an allowance will be
made and when a definite limit is set to the amount of such an
allowance, the valuation experts will be relieved of much em-
barrassment.
In the case of the established utility much of the difficulty
ordinarily encountered when water-rights or franchises are to
be valued as a basis for fixing rates will fall away if the method of
procedure which the author recommends be followed and the
invested capital and not present value be made the rate-base.
Views of the Wisconsin Railroad Commission on Water-
power Value. — The attitude of the Wisconsin Railroad Com-
mission toward the determination of the value of a water-power
by a comparison with the cost of steam power appears in the
following quotation from the Commission’s decision in the case
of the City of Beloit vs. Beloit Water Gas and Electric Co.
(Wis. R. C. R,, Vol. 7, p- 247).
