ELEMENTS DESERVING SPECIAL CONSIDERATION 201
thereafter, to so adjust rates that, for a suitable period of time,
the benefit of the reduced cost will be shared on a fair basis by
the owner and the rate-payer. Any treatment less favorable
to the owner of a public utility would discourage the introduction
of innovations if they involve further investment of capital and
would make for inefficient rather than for efficient management.
The owner must not be expected to consent to an increase of
hazard without an increase of profit.
The practice of attempting to foresee obsolescence and of
burdening the rate-payer before the failure by obsolescence with
the charge that is necessary to amortize the capital which obsolescence
 renders useless, is not alone unwise but unjust. It is
not fair to the rate-payer because those who pay rates before the
betterment is made should not be made to pay for the advantage
which will come to those who pay rates after the betterment has
been made; it is not fair to the owner because while apparently
increasing his earnings it will act, as do all high charges for service,
as a deterrent upon the extension of business and because there
will be cases where by error in the estimate of time allowance for
obsolescence the owner will be called upon to make a sacrifice
when, due to obsolescence, property is abandoned, which cannot
be offset against the advantage that may come to the owners of
other utilities who benefit by an allowance for something which,
in their case, never happens. The obsolescence will, in many
cases, occur before any adequate provision to meet it has been
made.
B — Losses From Fortuitous Events
Amortization of Losses from Fortuitous Events. — Losses of
magnitude which result from floods, earthquakes, volcanic
eruptions and the like and in general losses against which the
owner cannot insure, belong to a class of sacrifices which, like
those due to obsolescence, should be made good to the owner of
the utility after the event, by the public, that is to say, by the
rate-payers. Such losses cannot be forecast. They should not
fall entirely on the owner of the utility. In some fashion and to