Opinion ID: 2309949
Heading Depth: 1
Heading Rank: 2

Heading: Accumulated Depreciation

Text: The Commission deducted from the trended cost figures an item for depreciation amounting to 39.9% of the cost figures. This is the precise percentage of depreciation which had been deducted by the companies from their original cost base. It is argued by the Commission that this is the only logical manner of determining the percentage of depreciation of a trended value rate base. The Superior Court rejected the argument as an arbitrary application of a theoretical formula derived from an average life span of different elements of the plants. Rather it was held that depreciation of a trended cost value should be based upon a careful consideration of the actual facts, i. e., the actual physical depreciation of the assets involved. This is what the companies purported to do. We agree with the Superior Court. It is, we think, obvious that the companies in depreciating the original cost of their properties on their books were not attempting to determine a fair rate base. Since the depreciation reserve carried on the companies' books does not have any exact relationship to accumulated depreciation for rate base purposes it was arbitrary for the Commission to accept a ratio established by accumulated depreciation reserve and to ignore entirely the companies' studies of actual accumulated depreciation. City of Pittsburgh v. Pennsylvania Public Utility Commission, 187 Pa.Super. 341, 144 A.2d 648. The fundamental error of the Commission in this respect was its failure to give any weight at all to trended cost depreciated. Diamond State Telephone Co., 10 Terry 203, 113 A.2d 437.