200 VALUATION, DEPRECIATION AND THE RATE-BASE
been correctly foreseen and as though funds for its replacement
had already been collected from the rate-payers, it may still appear
 on the books as an element of some remaining value, due
to insufficient collections for its complete retirement. If this
apparent remaining value were ignored, and rates were established
 as though the abandoned property had never been in
use, the rate-payer would at once get the full benefit of the
innovation and the owner would have made a sacrifice of
capital which he could perhaps have avoided by being a less
efficient manager and holding to the older, less efficient plan of
operation. Let it be known that the usual procedure will be to
forecast failures by obsolescence and to amortize the capital in
such properties which become obsolete on the basis of assumed
average conditions, which means inadequate amortization in
many cases, and there will no longer be any inducement to the
owner to improve the efficiency of his plant. He will conclude
that it will be safest not to use new inventions or to introduce new
processes so long as a sacrifice of capital is thereby involved.
He might, in making an innovation, find that he had on his hands
abandoned property, the cost of which has not only not been fully
returned to him but concerning the further amortization of which
the established rules of rate-regulating bodies may give no adequate
 assurance.
Obsolescence Should Affect Rates After, not Before, the
Event. — It seems self-evident that when the introduction of a
new invention, whether the same applies to a machine or to a
process, reduces the cost of operation, the resulting advantage
should go to both the owner of the utility and the rate-payer.
But it is also true that in such event there will be no hardship
imposed on the rate-payer if the benefit of reduced cost of producing
 the output does not come to him immediately. A reasonable
 procedure would therefore be, in all such cases, to allow
the rates to remain as they would have been without the new
process (unless a reduction would result in increased demand and
greater net profit to the owner), at least long enough to amortize
so much of the original plant as is thereby rendered useless and,