The Valuation of Public Utility Property

The primary object of this paper is to show that, in any valuation or appraisal that is to be made for purposes of rate-making or security issues., the proper figure to be used is the actual cost to date of the work in question; provided, of course, that there has not been extravagance, fraud, or gross mismanagement in the origin or development of the enterprise. At the same time, it is also shown that, although this value is a basic figure, it is not necessarily the only and final one to be used for any and every purpose for which a valuation may be undertaken. Reproduction or replacement cost, cost of reproduction less depreciation, etc., all have their proper place, and should be used under the proper conditions. In order to show this, it has been necessary to go back to the fundamental beginnings of business, as exemplified in the private business, and trace the development of the private corporation and the public utility corporation from this origin, at the same time showing the similarity and dissimilarity between these three classes of organizations. With this as a basis, it is shown how the same principles can and should be applied in the valuation of public utility property as would be used in that of a private individual.