12 VALUATION, DEPRECIATION AND THE RATE-BASE 
without deduction for depreciation his starting point in de- 
termining what he can afford to pay. 
This last case is in conformity with the requirements herein 
explained, that the investment in a public utility should remain, 
at all times, unimpaired. It is at variance with the plan ad- 
vocated by many and approved in various court decisions, that 
the appraisal for rate-fixing purposes shall fluctuate from year 
to year with the age and remaining service value of the perish- 
able elements that go to make up a public service plant. 
Present Value as a Starting Point. — Despite prevailing sen- 
timent and rulings of the public service commissions and de- 
cisions of the courts in favor of making ‘‘ present value’ the 
starting point when rates are to be regulated, it will be ap- 
parent to the student that what is estimated as ““ depreciation ” 
which may never have been earned and collected has not neces- 
sarily been a repayment of capital and that therefore “ present 
value ” is not always the best starting point. 
The wisdom of starting with present value ”” or with “ value ” 
in any form may well be questioned because value is a result of 
assured earnings and such values as are not covered by the invest- 
ment do not exist until the earnings create them. In appraising 
for rate-fixing purposes the aim should be to make the legitimate 
investment and not the depreciated value the rate-base. 
It is sometimes difficult to modify the “fair value” basis of 
rates as heretofore insisted upon by the courts so that it will fit 
local conditions as in the following illustrations: 
1. Adjacent to the built-up section of a community which 
is being supplied with water at satisfactory and in every way 
equitable rates, a large subdivision of acre property is being 
made. Streets have been laid out and paved, sidewalks have 
been constructed, an adequate sewer system has been provided 
and a system of water mains has been constructed. These 
water mains conform in every respect to the requirements of 
the owner of the water-works to whom this system of mains is 
now offered on the sole condition that he supply prospective 
customers with water.