314 VALUATION, DEPRECIATION AND THE RATE-BASE
“In the case of a public service company, where the authorities
 may always require the plant to be kept up to standard,
there is an obvious advantage in declining to attempt a repeated
adjustment between the actual renewals necessary and normal
renewals, as would be necessary if the present prospect of such
allowances were now discounted; it is the better practice to
allow the plant to bear its own extra renewals and to insist that
it shall always be kept up. Therefore it appears that, so far as
concerns the future, the age of the plant should not be a function
in the rate base.’
“ On the other hand, in computing the ‘rate base’ from the
original cost, depreciation is of vital consequence. Practical
men will prefer to ascertain the cost of a present plant by experience,
 when they can, rather than by estimate, just as the master
here has done. In so arriving at the cost of a present plant of
equal capacity, it is clear that the original cost of the plant in
question must be abated by depreciation, so far as that is reflected
 in a loss of capacity. In such a calculation, however,
there must figure past renewals as an offset to past depreciation,
and, if in fact the capacity has remained the same, depreciation
should not be a function of the ‘ rate-base ’ at all. In such a case
the inquiry as to depreciation should be confined to changes in
¢ price levels.”
In the matter of ascertaining “ current depreciation,” being
that item of operating expense in its larger sense which had
better be called the replacement requirement,” it is of interest
to note that in the case of the Glaveston Electric Company vs.
the City of Galveston tried before the District Court, S. D.
Texas in 1921 and affirmed by the U. S. Supreme Court (272 Fed.,
p. 147) the lower Court in discussing depreciation said:
« On the other hand when the matter of establishing the
depreciation annuity is considered, the analytic process is employed,
 and the sum total of the value of the plant is resolved
into its constituent items, so as to select those making up the
whole which are susceptible to depreciation. Under the influence
 of this process it is clear that the overhead items must be
discarded in arriving at the annual depreciation.
“ That this disposition is sound as to such items as interest
during construction, organization expense, law expenses, etc.,
admits of no doubt, because under no kind of theory could they