FUNDAMENTAL PRINCIPLES 
5. The owner of a public utility is entitled to a reasonable 
share in the general prosperity of the community which he 
serves. For this reason he should be allowed a share in the 
increase of value which results from population growth. If 
present value is made the rate-base, he will get the apprecia- 
tion of real estate (if such increase be not excessive). If the 
public utility has but little or no property which appreciates 
then some other factor may be brought into consideration in 
determining the fair return. It would be sound doctrine to 
exclude appreciation from the rate-base thus avoiding uncer- 
tain and accidental reward and to allow the unearned incre- 
ment to appear in the net earnings. 
6. Where the invested capital is small and the volume of 
business large, the owner of the utility is entitled to have the 
volume of business considered as well as the invested capital 
when rates are to be fixed. It would generally be good prac- 
tice to take the volume of business into account as well as the 
rate-base when rates are to be regulated, but this is not yet 
an established practice. 
7. The depreciation of an item used in the public service 
does not reduce the value of the service or commodity which 
the public utility supplies to the consumer. The value of the 
service is ordinarily unaffected by depreciation. Depreciation 
is a lessening of worth which may result from any cause. Wear 
and tear suggest themselves as the prime cause of the deprecia- 
tion of articles in use, but it is sometimes difficult to establish a 
connection between the rate at which an article is consumed in 
service by wear and tear and its lessening worth. The accrued 
depreciation of any article is ascertainable from the probable life 
new of the article, the cost of replacing it at the end of its life, 
its probable remaining term of usefulness, and its original cost. 
In practice the accrued depreciation is usually computed from 
the cost of the article or rather from its wearing value, its prob- 
able life new and its expectancy. The cost affords a convenient 
basis for approximation. (This does not apply to certain 
articles which are readily replaced such as automobiles when 
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