CHAPTER XV
ELEMENTS DESERVING SPECIAL CONSIDERATION
WHEN RATES ARE TO BE FIXED
(Note: This chapter is substantially as it appeared originally in the author’s
“Public Utility Rate Fixing,” now out of print.)
A — Obsolescence
Obsolescence Cannot Be Predicted. — An appliance, machinery
 or a process of manufacture in use by a public utility may
under efficient management at any time be replaced and superseded
 by a better device or process. When this is the case more
or less property is usually discarded, which, under the conditions
as they prevailed when this property first came into use, should
have served for many years longer. Obsolescence has forced its
abandonment.
The knowledge that obsolescence may shorten the term of
usefulness of a machine or of portions of any plant used in the
public service has prompted valuation experts and the rate-regulating
 authorities to attempt estimates of the allowances which
should be made in the earnings to cover the prospective abandonment
 of property due to this cause.
The last word has not been said in the discovery of new forces
in nature and their adaptation to human requirements. It is
the belief of many engineers, for example, that the internal combustion
 engine will put the old types of marine engines of ocean
freighters on the scrap heap, and yet the older type under gradual
development to its present high state of efficiency has maintained
itself for more than a hundred years.
The use of oil in place of coal, not alone as a producer of gas
but also as fuel in the production of steam, has caused appliances
and machinery to be abandoned which would otherwise have
continued in service. No one today can be sure which of two

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