POSSIBLE PROCEDURES IN FIXING RATES 103
“2. When a normal life for a particular item of property has
been prescribed for use in determining depreciation, that life
must not be departed from unless an investigation of the records
of the carrier or actual inspection in the field, or the two com-
bined, warrant such departure. In no case shall a remaining
service life of an item of property be taken at more than the
prescribed normal life.
“3. When no normal life is prescribed, the total service life
and remaining service life shall be determined from observation
of actual conditions and the examination of records and data
from reliable sources.
“4. Salvage and scrap will be allowed in cases where such
values actually exist. Whether allowance shall be made in a
given case for salvage or scrap shall be left to the discretion of
the member of the Engineering Board. If an allowance is made
this fact shall in all cases be stated upon the pricing sheet even
though at the time the amount of the allowance cannot be
given.”
The complex operations involved in applying these rules when
rates are to be fixed, is in strong contrast with the simple opera-
tions involved in proceeding under the Unlimited Life Method
which requires no estimate of accrued depreciation.
The Use of Cost Records and Cost of Reproduction New. —
The purpose of the valuation of the public utility may be as
already stated:
a. To fix a sélling price.
b. To establish a basis for an issue of securities.
¢. To establish a rate-base.
d. To serve as a basis for taxation.
The ascertainment of the rate-base is important. By adding
to or subtracting from the same, various facts relating to values
can be ascertained. It may be possible to determine cost of
construction from the cost records. When this can be done,
there should be a check by means of estimates of the cost of
reconstruction to make certain that the actual reported cost
is legitimate and that it does not include too much overhead
expense nor too large expenditures for abandoned or discarded
items, i.e., for items that were intended for temporary use
