外文翻译公允价值的利率施行.doc

外文翻译-公允价值的利率施行 本科毕业论文设计外 文 翻 译外文出处 New York City 外文作者 Alfred MKing 原文FAIR VALUE FOR RATE PURPOSES In considering fair value for rate purposes it is important to bear in mind that the determination of fair value is a part of the process of determining a reasonable rate of charge The content of fair value may therefore depend largely on our conception of what constitutes rate reasonableness It will aid to a clearer determination of this intricate problem if for the moment we forget "fair value" and concentrate our attention on the fundamentals of a reasonable rate of charge By "reasonable rate" as here used we mean the reasonableness of the rate schedule as a whole and not the adjustment of the various specific rates that go to make up the complete rate schedule It is the total price or compensation collected from the public for its entire service rather than the price for any particular service or class of services A reasonable rate of charge in this sense of a reasonable rate schedule is a rate that gives the company reasonable compensation for the entire service which it renders the publicWhat then is reasonable compensation in the case of the appropriate and normally successful public utility enterprisesReasonable compensation is here equivalent to the normal cost of production What other basis can there be for the determination of a fair price in the case of a virtual monopolyIf a commodity can be freely and quickly produced its market price will follow quite closely its cost of production This must be so because under the assumed conditions there could be no reason for paying more than the cost of productionIf a commodity may be freely produced but only by specially trained workmen a large fixed investment and great business risks the cost of production will still in the long run tend to limit market price It is clear that the production of a particular commodity will not be permanently carried on unless the price received covers all the costs of production Under free competition it is also clear that a price higher than that necessary to cover special risk interest profits and operating expenses will bring new capital into the industry and thus bring the price down to the cost of productionFor a freely produced commodity therefore a price that does not conform to cost of production is not a stable or normal price In a static society with perfectly free competitionThe market price would conform to cost of production In our present highly dynamic society with many actual limitations upon perfect freedom of competition market price and cost of production are often very far apart Economists have used the term " normal price " to indicate in the case of a freely produced commodity that price that corresponds to cost of production It is the normal price because it is the price toward which market prices tend it is the price that under assumed conditions would be stableThe above presupposes competitive conditions In the case of unregulated virtual monopoly the force that tends to limit prices charged to the cost of production is lacking This creates the necessity for public regulation of the rates of charge of public service companies The aim of public regulation is to accomplish what in other industries is assumed to be accomplished automatically by free competition that is to limit the price charged to the normal cost of production In the case of authorized and regulated monopolyordinarily the reasonable rate of charge will correspond exactly to the economists conception of normal price The reasonable rate is ordinarily the one fixed by the normal cost of productionIt is fixed by normal operating expenses plus a normal rate of return on a normal capital cost Normal cost is ordinarily the determining factor in fixing fair reasonable or normal prices in the case of a regulated monopolyThere is no reason why in the case of a virtual monopoly the public should be required to pay more than the normal cost of production and sound reason why in the long run the public cannot pay less Normal cost of production is the amount which in the long run it is necessary to pay to secure the utilities demanded by the public It is the amount that will secure an equilibrium between demand and supplyIn the case of a commodity requiring no capital outlay the normal cost of production is easily determined It is the present normal cost of the labor and materials entering into its production Cost consists merely of "operating expenses" and is not complicated by the question of capital cost and interest and profits thereonIn the case however of a commodity requiring a large fixed investment the determination of a normal cost of production is a complex process in the working out of which there is room for a wide divergence of opinion To the normal cost of labor and materials there must be added a fair estimate for depreciation and a fair return on capital cost The normal cost of labor and materials is complicated by the necessity of including provision for maintenancerepairs and depreciation The determination of a normal return on a normal capital cost requires a determination of two very difficult and complicated problems i What is the amount of the normal capital cost and 2 what constitutes a normal return on such amountNormal capital cost as applied to a new enterprise is a comparatively simple concept But what is it as applied to a long established enterprise to a water supply plant a gas plant or a railroad system Is it normal cost at the time originally installed or last renewed or on the other hand is it the present cost of reproductionIs it actual cost or reproduction cost We start with the premise that the reasonable rate of charge is to be determined by the fair cost of production The point at issue between actual cost and reproduction cost is really whether by cost of production we mean cost at a particular moment or cost averaged over a period of years In favor of present-moment cost it is asserted that what the public is entitled to is service at a rate of charge sufficient only to pay a fair return under present investment conditions upon the capital cost that would be required at present to furnish this serviceand conversely what the company is entitled to receive is a fair return under present investment conditions on the capital cost that it or another company would have to expend at present in order to provide the service A rate of charge measured on this basis is said to correspond to the present economic cost of the serviceThe determination of a normal capital cost is one step in the process of determining a normal price and this normal price is the amount which in the long run it is necessary to pay to secure the utilities demanded by the public It is the amount which constitutes an adequate inducement for investment Starting with the necessary investment as a base the investor will estimate all the risks and hazards of the business of every kind and natureand against this will place all the possible chances of profit The possible rate of return adequate to induce investment is naturally and necessarily a percentage on the actual cost From the standpoint of the investor a rate of profit based on any amount that is less than the actual cost is in excess of the actual rate of profitand a rate of profit based on any amount that is greater than the actual cost is less than the actual rate of profitThe fair rate of return could be altered so as in a measure to offset the appreciation or depreciation of the base to which such rate of return is applied With declining prices the risk of depreciation in reproduction cost would be offset by an increase in rate of return and with advancing prices the probability of appreciation would be offset by a decrease in the rate of return This however is but a poor method of accomplishing what can be more fairly and logically effected by directly basing the rate of return on actual capital cost Any method that is permanently fair to both parties must get back to actual capital cost as the base for actual as distinct from nominal profitsThe normal actual capital cost as a basis for rate determinationmoreover has a distinct advantage from the standpoint of public policy It is desirable that rate schedules should have stability and should not fluctuate with the price of iron pipe or copper wire or with real-estate activity or reactions A utility is not established for the purpose of speculating in copper wire or iron pipe or land It must however in furnishing its service invest its money permanently in these things The utility should not be expected to assume the risks of fluctuations in the price of the land and materials it uses The public interest is best subserved and the cost of production is lowered by reducing the risks incident to public utility enterprises The tendency of modern public service regulation is to establish more definite and equitable relations between the public and the company These more definite relations mean decreased risk and decreased risk means decreased cost of productionThe public utility renders a continuous service and in doing so requires a permanent fixed capital Both the plant and the business are a gradual growth This essential continuity of growth and service is the fact that seems to be lost sight of in present-moment reproduction methods of determining cost of production The service and its present cost are the result of a complex interplay of factors starting with the initiation of the enterprise Such cost is as much the result of past life and growth as it is of present conditionsInvestment depreciation operating costs risk are all bound up in the past growth and development of the existing utilityAs Justifying the reproduction method it may be argued that the public is always entitled to secure service under present conditions as to cost of production It is entitled to secure service at a rate of charge sufficient only to cover cost of operationinterest and profits of a substitute plant of the most modem approved design capable of performing the same service as the existing plant The company assumes the risk and enjoys the profitif any incident to this arrangement This method involves a reproduction of the service rather than a reproduction of the plantIf the old plant were wiped out what would it cost at present to construct and operate a plant capable of performing the service now performed by the old plant In the case of a water plant perhaps an entirely new source of supply would be used and the distribution system radically changed in the case of a gas planta different process of production employed and a few gas-holders substituted for many small ones in the case of an electric plantlarger units of production employed in the case of a railroad there might be a radical relocation and realignment of roadbed and important changes in the method of construction leading to great economies in operating cost It has been stated that if our railways were to be built anew in the light of our present knowledge and with our present traffic offerings and financial resources vast changes would be made in the character of construction"As thus stated the reproduction method has so many difficulties that it is practically never employed The reproduction of the service involves not only the determination of the cost of the most efficient substitute plant but the determination of the present cost of reproducing the business the proper allowance under present conditions for interest and profit and the operating costs for the substitute plant In most cases it is exceedingly difficult and expensive to determine the design of an equally efficient substitute plant In the case of a railroad for example the cost of determining a substitute location and of estimating the operating costs thereon would be so great as to render it entirely impractical as a factor in rate regulation It would require a careful survey of various available locations and estimates of construction and operating costs The engineering costs of such survey and estimates would be enormousThe cost of reproduction in practice therefore instead of meaning the cost of a substitute plant of the most modern approved design capable of performing the same service as the existing plant has come to mean the cost of a substantially identical reproduction of the existing plant This is the usual method It involves howevera partial abandonment of the reproduction of the service theory and a somewhat imperfect recognition of the fact that cost of production is necessarily related to the past as well as to the present and future It constitutes an imperfect recognition of the necessary continuity in the life of the plant and its serviceBy a further modification of the cost of reproduction methodcost of reproduction is made to mean not the cost at present prices of land labor and materials of reproducing a substantially identical plant under present conditions but the cost at present prices of land labor and materials of reproducing a substantially identical plant under the actual conditions under which the existing plant was originally constructed Under this method expenditures actually incurred in the development of the present property are fully allowed for even though they would not be met with in the reproduction of an identical substitute plant On the other hand certain expenditures that have not been incurred in the development of the existing property but would be incurred in the reproduction of the existing property are excluded The following is a statement of expenditures that would be included under this interpretation of the reproduction method "If trees were cleared then he the appraiser must allow for the cost of clearing although not a tree may now be standing If streets were graded then that grading must be estimated though to-day the entire city is as level as a floor If quicksand was encountered in laying a pipe-line then the added cost of excavating it must be allowed even though subsequent works have drained the line so that it no longer has a yard of quicksand If money was spent to educate the public to the use of the commodity sold by the corporation then that money is a development expense which must be allowed even though the expense would not now be incurred by a new corporation of like character" Pavement over mains laid at the expense of the city on the other hand is an example of a reproduction cost that would not be included under the modified rule above mentionedThe consideration under the reproduction method of piecemeal construction depends upon whether the modified view of cost of reproduction above referred to is adopted Under a strict application of the reproduction method there would be no occasion for the application of piecemeal met