The daily Gate City. [volume] (Keokuk, Iowa) 1855-1916, 1915-04-21

clpie OF equitable rates, but it Is an
otner matter to prepare rate sched-
ule in accordance with the principle
stated. The elements to be consid-
cred in fixing this schedule are:
% The total cost of service
(2) The apportionment of this total
cost over the different branches of
service rendered, (ie., residence light
ing-bnsiness lighting-retail power
and wholesale power).
90 The apportionment of the cost
OF service to each branch between
those elements of cost comprised in
the phrase readiness to serve" and
those elements of cost proportional to
the service actually used; and
(D The determination of unit costs
for each Of these branches of service.
In order to find the total cost of
service, 1t is necessary to determine
the fair value of the property employ
ed In furnishing that service, the ac-
tual moneys spent in the conduct of
the business and what will be reason
able allowances for interest dsprecia-
ton and profits. Right here we are
confronted with the fact that the
books Of the average utility company
have not been kept so as to furnish
sufficient data in the way Of detailed
values, amounts appropriated and &C.
tually spent for betterments. custom
ers records, operating costs, station
records, and the other data necessary
for complete analysis of the problem.
The total value Of a utility is dis-
ficult quantity to determine properly
and 1t can only be judged by consid-
ering the question of appraisal from
number Of standpoints. One impor-
tant indicator is the original cost
which will show what has actually
been expended on the property. This
book cost will Of course make no al
lowance for any changes in value be-
tween the value of the property at
the time it was built and the value at
the present time. 1t will, however, in
clude practically all other elements
Of value. Another indicator is the
earning power, although the earning
power under the existing rates is no
measure Of the fair value, it is pos
sible to get suggestive ideas by con-
sidering what would be the earning
power at rates which are accepted as
satisfactory in other properties of a
similar nature after making due al
lowance for actual conditions peculiar
to the locality in question.
There is still one more element to
consider before We can arrive at the
fair value and that Is the item some
times called going value or develop
ment expense. This going value. rep
resents the difference between two
plants exactly alike except that one
has service to sell but no customers,
while the other has both customers
and service.
How to Get at Rates.
Many methods of arriving at this
item have been suggested, but in the
final analysis it comes to question
Of Judgment and the amount usually
allowed varies from 10 to 20 percent
OF the sum Of all the other elements
of value. The total cost of service
is made up Of a number of elements.
The first is operating expense, the
second, maintenance expense: the
third, a depreciation charge, aud the
large, interest and profits. The justi-
fication Of the first two elements is
determined from a study OF the man.
agement, its methods and practices,
the condition of the equipment and
the circumstances under which the
services are rendered The third ele-
ment is the depreciation charge and
must be sufficient. to maintain the
in first class operating con-
dition at all periods of its life--to re-
new any worn out or obsolete parts.
and eventually to provide sufficient
fund to maintain the investment in
tact. The amount allowed is deter
mined upon from study of the cost