76 VALUATION, DEPRECIATION AND THE RATE-BASE
is allowed to remain uninfluenced by appreciation, the owner
of the public utility should be allowed a higher rate of return
than if appreciation were included in the appraisal of the rate-
base.
The endeavor should be to secure a general recognition of the
latter principle and thereby secure the same liberal treatment
for those utilities which do not include among their properties
land holdings, as is now accorded with approval of the courts,
to those which do include large amounts of real estate.
If treated in this way the owner will never be in a position to
capitalize appreciation, unless the use of the property in the
public service be abandoned. This is as it would be if the
owner were acting as agent, and is equitable.
In the Minnesota Rate Cases, the United States Supreme
Court apparently recognizes the broad principle that the public
service property should earn a return upon the increasing value
of its properties, provided the appreciation be properly ascer-
tained. The Court in these cases says:
« Assuming that the company is entitled to a reasonable share
in the general prosperity of the communities which it serves,
and thus to attribute to its property an increase in value, still
the increase so allowed, apart from any improvements it may
make, can not properly extend beyond the fair average of the
normal market value of the land in the vicinity having a similar
character.”
It would be much better to let this principle, recognized gen-
erally by the courts when they say that present value is to be
the basis of the calculations when rates are to be fixed, be ap-
plied, as already suggested, without reference to or without
being dependent upon and restricted to the present value of land,
<0 that the same share in the general prosperity would come to
the owner of the utility which owns no real estate as to the other
utility which owns broad acres.
Cost to Reproduce New Includes Appreciation. — When re-
production cost is used as a means of approximating the in-
vestment or the rate-base,” the basis of the calculation may
