Word: prudently
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...industry constantly needs. Rates are therefore based upon the value of the utility property involved. All methods of valuation are more or less arbitrary but they tend to run toward two extremes: 1) what it would cost to reproduce the property and 2) what the property originally cost a "prudent investor...
...Smythe v. Ames in 1897 the Supreme Court has steadily upheld the principle of reproduction costs. And the utilities since 1897 have been favored by the reproduction cost theory because prices have been on the rise. But before 1897, when prices were falling, the utilities clamored for the prudent investment basis and were bitterly attacked by the late great Robert Marion La Follette and other progressives of that day for so doing...
What President Roosevelt apparently wants is for the utilities to adopt the prudent investment basis voluntarily. Among the specific cases the President gave to point his moral was a ferryman on the Thames during Queen Elizabeth's reign. Under common law she could have valued the boat at $500, if that was its worth, and based his rates accordingly. If he had paid $1,000 for the boat, it was his own error and loss. Another Roosevelt example was a run-down electric plant in Georgia with a few miles of line, a few decrepit boilers worth...
...first things that put the Government in the power business in the first place was the New Deal's inability to enforce such ideas in the face of the Supreme Court. So-called "yardstick" rates were to be based on the Government's "prudent investment." But the powermen soon found that the Government held down the original cost by the simple expedient of writing off large chunks to such things as flood control or navigation improvement. In the opinion of powermen, who must pay interest on the entire cost of their dams and plants, these write-offs made...
...prudent to raise additional capital at this time to provide against contingencies calling for greater working capital, and to provide against a reduction of its cash funds, which assuming a reasonable dividend policy, it expects would otherwise take place over the next year, due to increased working capital requirements resulting from a general expansion of the corporation's volume of business...