upr000283 204

% Joint Facility Rent charge of $105,063.65. We do not question the operation and maintenance, supervision and management ex­pense items which go into this computation but there are sub­stantial errors in the items for depreciation, taxes and interest which we desire to call to the attention of the Commission. The greatest error in the depreciation charge arises from the use of an incorrect capital base upon which to apply the depreciation rate. The average rate of 2% used by the Com­mission will give a substantially greater depreciation charge than that shown in the Commission’s computations when applied to the full and true capital base. The Commission not only ap­plied the depreciation rate upon a deficient capital base, but in addition applied the depreciation rate to the depreciated capital base rather than the full capital base. This is plainly an er­roneous way to compute straight line depreciation. The rate of 2% suggested by the Commission is designed to fully depreciate the capital cost in a period of fifty years at a charge each year amounting to l/50th of the capital investment. In order to accomplish this result it is necessary to apply the rate of 2% to the full capital cost and not the depreciated capital at the end of each year. If the depreciation rate is applied to the de­preciated base each year, the annual depreciation charge becomes successively smaller and the capital cost would never be fully depreciated in a thousand years or even in an infinite number of years. The federal income tax item shown in the Commission’s -50-