Orleans County monitor. [volume] (Barton, Vt.) 1872-1953, 1908-05-18
MUNICIPAL ELECTRIC LIGHTING.
General Principles Governing the Al.
lowances for Depreciation.
PART l.

| lowances for Depreciation.
PART
An electric light plant, whether
owned by municipality or not, is
constantly wearing out. Everybody
sees and admits that. Also it is con-
stantly growing old-getting old
fashioned. out of date, becoming obso-
lete. This last is sometimes overlooked
and it is accordingly represented las
this city, that depreciation-loss of
value of physical assets-is solely a
matter of wear and tear resulting from
use. Suppose a piece of electrical
apparatus were bought and stored in a
secure manner, and never used at all !;
what would it be worth at the end Of
Is or 20 years? Probably little if any,
thing above its value as junk. If it
were used it is not unlikely that even
at the end of 10 years it would not be
profitable to continue its use and it
ought to be sold for what it will bring.
Depreciation, therefore, is made up of
two elements, physical deterioration
and obsolescence.
To explain and illustrate. The build
ings of plant,if of solid construction
and not subject to excessive vibration,
might last with moderate repairs for a
century. They are likely to be super
seeded long before that period elapses,
either because they are outgrown, or
because it comes about. with the
changes that time brings, that they
are not located in the right place.
The machines and apparatus gener-
ally, ''overhead construction and all
the rest, will need to be scrapped'
before they are physically exhausted
or worn out, owing both to the increas-
ing cost of up-keep and, what is more
important in electrical industry OF all
others, owing to their having become
relatively inefficient by reason Of new
inventions. The advance of the arts
plays havoc with invested values in
any progressive industry. The Penn
sylvania railroad sells its locomotives
after 10 years use, although they are
good with moderate repairs for an
other 10 years, in order to get the
advantage of the latest improvements.
Obviously it must write down. its
assets literally every 10 years in carry
ing out such a policy. One Of the
chief reasons why industries of any
sort conducted by any branch of
government are, as rule, carried on
wastefully and at a greater expense
than private industries, is that govern
ments exercise no bold and intelligent
policy as to "scrapping' use,
let US say, a steam engine, as long it
will hold together and functionate at
ALL The steam pump Of our water
department, for example, has been in
continuous use for 40 years. 1t is
wasting coal excessively, and should
have been replaced long ago. Because
of the principle of obsolescence it is
often mistake to construct buildings
or to buald machines Of great solidity
Durability costs money and there is
such a thing as excessive, uneconom-
ical durability.
For further illustration, and for sake
of argumentS let us suppose "a suppo-
sition rot far from the actual fact as
shown by exparience) that it is fore
seen that ten ears from the time of its
installation, municipal electric light
plant will have ! become virtually de:
funct, and that the necessity will
have arisen to rebuild and re-equip
and start afresh. \ If no provision has
been made for that contingency, it
will be necessary tx make fresh issue
of bonds and the debt of the city will
be increased. But if each year in the
past, after all ordinary out-of-pocket
operating expenses ana interest charges
have been met, there has also been a
payment from earnings to sinking
fund sufficient to amount in 10 years
with interest to the whole of the old
issue of bond, then all will be we'll sc
far as increase of debt is concerned.
The old bonds will have bfen paid off
and the new bonds will Aimply take
their place. Under this plan every
10 years, by hypothesis. the aplant will
be rebuilt and the debt / renewed.
There will be no breakdown of the
electric department undertaking., but
the city will never free itself from the
debt incurred on its behalf. (Public
policy. however. requires that a (muni-
cipal enterprise shall permanently free
itself from debt, so that the credit of