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

Question of Expense.
When we come to the nature Of the
expense, close study of the same re-
veals the fact that there is one class
of expense which is usually classed
under the head of fixed expense and
which, as rule, is not affected by
the output or by the extent to which
the service furnished may be used.
They are as large when the output is
at minimum, or even when there is
little or no output as when the full
capacity Of the service is being used.
They are also clearly seen to be as
great for consumer who is using
little or no service but whom the
plant is ready to serve, as for a con-
sumner with a similar installation who
is using the service great deal. The
former has the capacity at his demand
and the plant must be ready to fur.
nish 1T. The expenses of this nature
are directly dependent upon the in
vestment that is required for the GUS
toners and increase or decrease with
In limits with the demand made by
the customers the plant serves.
Further study reveals that there Is
a second class Of expenses which
varies with the number of customers
the plant is serving and increases or
decreases with any increase Or de-
crease in this number. The expenses
spoken of constitute only part Of
the cost of operation. The plant must
be kept running and be ready to de-
liver service as required. This can
not be done without considerable ex-
.2enditure for fuel, water, oil, lamp re-
newals and for such repairs, renew
ais, labor, and other items as are re-
CURED for operation and depend upon
it. These items depend upon the out
put and increase as the output in
creases and decreases as the output
decreases and practically in the same
proportion.
Going further into our study Of
costs, we find that there are certain
items of cost which we cannot at
tribute directly to either the demand,
the consumer, or the output but which
are dependent in some way upon two
or more Of them. Experience has
shown that when the above classified
ton of expense have each been
charged with all the items that can
be directly attributed to them and
the items which are attributable to
moro than one classification are pro-
portioned according to the direct ex-
pense-ths results obtained are such
as can safely be used as basis for
rates.
Just Rates to All.
In order to establish rates that viii
be just to all classes, we have seen
that 1t is necessary: abi
f1r To determine the total cost Of
service.
ca To apportion this total cost be.
tween the different branches Of ser.
vice rendered; and
ca To separate the cost of service
for each branch between the expenses
which depend directly on the GUS
toner, the demand. and the output.
These appointments are logical
and well within the bounds Of reason
and it is also logical and reasonable
to say that each customer or class
should bear the expense Of each of
these three classes in just proportion.
Any rate schedule under which each
customer is made to bear his just pro-
portion of the customer costs on the
basis Of the number of customers, the
demand costs on the basis of his de.
mand for service and the output costs
on the basis Of units of service used,
naturally results in a higher average
rate per unit for the customers who
use their service a short time only
each day than for those who use the
service provided for longer daily
periods. This difference in the cost
or rate is just and cannot be termed
discriminatory.
Adapted to Conditions.
The cost basis of rate making
which have tried to outline is easily
adapted to any and all conditions
that arise in the field of supplying
service. Under it consideration can
be given to the short hour user whose
demand is entirely on the peak; to
the short hour user whose demand IL
never on the peak; to the long hour
user whose use of service is off Of the
peak and in addition thereto to the
long hour user whose use also comes
in the peak hours and to practically
every other condition that may arise
We would not have to go to all this
trouble and work If all customers
we're in the same class, If their de-
mand was the same and they all used
their demand at the same time for