Cost of and rates for electric service

At the second regular meeting of the University of Michigan Branch of the A. I. E. E., held on November 8, Mr. B. J. Denman, acting chief engineer of the Detroit Edison Company, presented a paper on “Cost of and Rates for Electric Service.” Mr. Denman explained the division of “cost” into “fixed charges” and “running expenses.” Fixed charges included interest on investment, depreciation of property, office expenses, and insurance. Running expenses included operating cost and maintenance, maintenance taking of minor alterations and repairs not chargeable to depreciation. The amount to be set aside each year to cover depreciation is based upon the estimated useful lifetime of the equipment. It may either be placed in a bank as a reserve fund or invested in the property. Three reasons given for 41 junking “equipment were wear,” “obsolescence”, and “inadequacy.” The latter does not always justify junking a piece of machinery, because it might be in good operating condition and therefore have a second-hand value which is greater than its value as junk.