Opinion ID: 1443207
Heading Depth: 1
Heading Rank: 4

Heading: Actual Loss in Value ( Depreciation, Obsolescence, etc. ).

Text: As in the case of the determination of current value there are deficiencies in the Utility's evidence of actual loss in value which under its methods of determination of a present value rate base must be considered. We agree with the respondent's determination on this aspect of the case, namely that the evidence in this respect is so deficient as to have little significance. In other words, the Utility again failed to carry the burden of proof. For actual existing depreciation (actual loss of value) of the mass accounts such as poles, cross-arms, guys, conductors and distribution transformers, the Utility introduced evidence derived from a random sample method of inspection. There was no evidence introduced of the number of poles of various types in use, and it was admitted that the inspection was in the aggregate, that is, without regard to type or class or height or any other characteristics of the poles, nor as to the type of preservative treatment. Mr. Davis testified that random sampling has, as its objective, the securing of a small group out of a statical universe, such group possessing the same general characteristics as the complete series of cases. It appears that upon the evidence adduced the respondent would have been justified in rejecting as unreliable the proof of actual depreciation of the poles merely on the failure of the Utility to prove that the samples inspected were representative of the whole in character. The only common characteristic apparent in the evidence is that all were poles! However it also appears that the method of rating poles was of questionable value. The Utility's evidence was of separate estimates of depreciation for butts, shanks and tops of poles, averaged to obtain an average depreciation factor. This, however, seems an unreliable method, for, as the respondent observed in its decision, poles exist as units and the butts, shanks and tops are not replaced separately. As to transformers, field observations related only to the external features and as to oil seepage or leakage and appearance (excessive darkening of paint) of overheating. Upon this evidence and the testimony of Mr. Newman, who made the examinations which indicated he had no familiarity with depreciation factors of the inner parts of transformers, the proofs in this respect afford little of merit on a determination of actual loss of value. The respondent further found that the company in its current value study made no actual allowance for physical deterioration of service connections despite the fact that many of the service connections had been installed decades ago. This conclusion is supported by the evidence. The Utility's proof of physical deteriorations of steam generating facilities appears to be equally unreliable. On the obsolescence factor the respondent stated in its decision: It is difficult to understand how an obsolescence deduction has been made by overvaluing old facilities and then reducing the value level only enough to be equivalent to the value level for more efficient new facilities. This observation was addressed principally to the 55 MW generating unit hereinbefore mentioned and its merit is obvious upon the evidence introduced. Compare Market Street R. Co. v. Railroad Comm. of Cal., supra . The foregoing examples are characteristic of the evidence on actual loss in value. In this respect the Utility failed to carry the burden of proof.