The Waterbury Democrat., 1943-03-23

MiddletOWn and a present
Public Utilities Commission, speak
ing ON Utility Regulation, assuming
that high taxes will prevail for
many years, asked who shall pay
these taxes?" He laid down the
precept that, whoever levies the
taxes, the public utility companies
must be allowed a return sufficient
to tempt investors to supply funds
to keep the utility plants running.
Devoting much of his paper to
another burning issue, water COM
pany rate schedules, he said that,
however high the rates Of the small
consumer may be, they are poten-
TALLY lower than would be necessary
II the company were not permitted
to use the promotional pattern and
reduce rates in the upper blocks for
large consumers.
Depreciation Problem
The problem Of depreciation In
utility accounting has promoted
more controversy and less illumina-
ton than any other regulatory prob
lem, he said. He added: Every
body admits-that Is, everybody
whose admission has any Signifi-
cance-that depreciation Is a legiti-
mate part of cost. The controversy
seems to wage primarily as to the
proper method Of computing de-
probation and the use to which the
depreciation reserve Is put in rate
litigation. However accurate one
may be in estimating physical de-
probation, there Is, so far as ]
know, no intelligent pretenSe at
complete accuracy in the determ-
nation Of functional depreciation.
The refusal to attempt to estimate
functional depreciation is the adop-
ton of the traditional ostrich phil
osophy, not of burying ones head in
the sand, but rather Of breaking
ones head on the curbstone because
of refusal to do the reasonable
thing that is called for by rational
action.
DR.. Fisher submitted the follow
ing tentative conclusions on this
point:
/. To the extent that customer
is compelled to pay price which
permits the company to charge ex-
cessive depreciation. and to the ex-
tent that this excess Is capitalized
as a portion Of the rate base OF the
utility. to that extent the cuSomer
is penalized by the necessity Of pay
ing q return on capital which he
has inyoluntarily contributed to the
utility company. -
2. To the extent that a utility
company is permitted to collect In
advance a so-called depreciation re-
serve to take care OF non-recurrine
and Unforeseen contingencies, thus
terrifying itself against the impact
OF change and disaster. to that ex'
tent the risk is eliminated and the
rate Of return permitted such a util-
ity should reflect the shifting OF this
risk from the utility to the GUS
/ toner.
am short, the utility should b.
given q lower rate Of return thar
would be proper without such pro-
lection"
"The rate schedule for water com.
panles seems TO me to have received
far less consideration than 1t merits
In the construction Of a water reser-
yolr presumably the promoters Sc
Iect first that site which viii give
the best results at the lowest price
consistent with quality and perform
ance. With an expansion OF pop.
ulation and an increase In the num-
Der of consumers the water utility
labors under the necessity Of tap
ping new sources OF supply which
are made available on terms more
costly than those entailed by its
initial plant construction. Instead
OF decreasing cost With increased
OUTPUT. therefore, one finds the re-
verse and condition In which In
creased output Is accompanied by
increased unit cost.
"Does Il follow from this that oIii
block rate schedules for water CON-
panies are unwarranted2 ! sug'
gest, tentatively, that the proper
rate schedule for q water company
would include an appropriate Serv-
/ Ice charge and thereafter c0mmod-
| lty charge which would follow al.
most II not entirely horizontal
line. II this be true the lower price
for additional block In q water
schedule Is open 10 serious question
'sThe Justification for q per family
charge Is quite clear when water
Il not cold by meter submit thai
tho family eureharge, whers water Y
sold By meter, Is an anomaly aiit