be the length of time that it can be retained in use and furnish good, safe and satisfactory service to the public.

In other words, the physical life of a plant unit is determined largely by what is usually spoken of as the “wear and tear" upon the unit arising from its position and the service which it is called upon to perform.

119. Factors affecting life of plant. The years of remaining serviceable or useful life of plant elements must be determined by a careful consideration of all factors or conditions which may tend to lengthen or shorten the period of serviceability.

The following factors have been admitted as the most important to be considered in the determination of this figure.

1. Wear and tear of plant.

2. Obsolescence.

3. Inadequacy.

4. Tenure of holding.

120. Inefficiency.— Before entering upon a consideration of the above factors influencing the life of plant units, it will be well to discuss somewhat at length how far the value of a plant is affected by the relative inefficiency of the older units which may be found in service as compared with a plant composed entirely of new or newer units. This question is introduced thus early in the consideration of depreciation for the reason that the relative inefficiency of an older plant, as compared with a newer, is one of the most frequent arguments raised to substantiate the claim in a valuation that the existing plant, being more or less inefficient, is really second-hand and, therefore, of an abnormally low value. Moreover, the inefficiency of a unit may arise from the wear and tear of use, from the antiquation of the method of its operation as compared with a substitute of later and

improved design, or from the fact that the business has grown to such an extent as to render the unit too small for present demands. Thus inefficiency enters as a factor affecting the three principal factors, to be discussed later, which have a dominating influence in the decision of the engineer as to the probable life of the unit.

In what follows it will be shown that inefficiency cannot be made a factor distinct from "wear and tear,' "obsolesence," and "inadequacy," which are the three main causes of the limits imposed upon the life of plant units, but rather that inefficiency is an important consideration or factor entering into the determination of the life period assigned from a study of these three main factors affecting the "life" of perishable property.

It must be recognized, however, that, for a large number of classes of units, inefficiency does not enter at all for the reason that the units of such classes are equally efficient throughout their life. Clearly in such cases the physical life is limited only by the wear and tear which, in time, renders them so untrustworthy as to introduce a hazard to the continuity of a high grade of service. Thus in the case of poles, wires, conduits and many other elements of a similar character, there is no diminution in the efficiency of the units of the several elements throughout their physical life. When they become so weak that there is danger of their failing to give good service, they are removed and replaced by new units. But during their entire life there is little or no expense of maintenance incurred to keep them in a high state of efficiency. Their efficiency remains practically uniform.

But with other classes of property, especially such as have moving parts, there is an increasing need of repairs with increasing life, so that the cost of maintenance becomes, in time, a matter of serious importance in determining the useful life of the unit. It is true that, by con

stant and frequent repairs, the useful life of a unit might be greatly prolonged, but such increased useful life could be obtained only by an excessive cost of maintenance. As this cost of maintenance is a charge which must be borne by the public, no public service undertaking would have performed its proper duty to the public if it had not seen that the useful life of each plant unit was made no longer than could be justified by a full consideration of the economic conditions arising from the cost and annual charges of a new unit as balanced by the annual charges arising from the retention of an older unit in service.

The same is true in the case of such elements as gradually become less efficient and must be subjected to frequent repairs in order to maintain a required standard of operation. The problem, in all such cases, becomes one of determining the life of a unit by a consideration of cost and annual charge upon a new unit, and the cost of maintenance which may be expected to arise during succeeding years if the existing unit is retained in service. This problem is one which is familiar to all engineers and is still one of determining the life of a unit but, for units of this class, the estimate of probable life is not based upon general knowledge and experience as to the usual life of units of the same character under similar conditions but upon figures gained from experience as to costs of new units and the annual charges upon such units during succeeding years of service.

Again, a plant unit may become inefficient as compared with a new form of later design or in which some new invention has been incorporated. In such a case the inefficiency will become apparent in a larger cost for the production of the service sold than would be the case if the newer form were used. The problem is, again, a simple and usual one for the engineer to solve, having

due regard for all of the annual charges which affect the cost of the service to the public. In this case the engineer must determine when the renewal should be made and produce a minimum charge over a term of years for interest on the investment, depreciation reserves, maintenance and cost of operation. If the figures representing these annual charges have been determined with care, the life to be given to the unit can be readily assigned.

Again, a plant unit which has become too small may have its life determined largely by engineering reasoning based upon the above items of annual expense which must be borne by the public.

It is thus seen that inefficiency is a result produced in many cases by the "wear and tear,' "obsolescence," or "inadequacy" of the plant unit. It is the measure usually of the limit imposed upon the life of the units by each one of the above three factors. It cannot be considered in any way as an independent factor producing depreciation nor, in the usual interpretation of its effect, of transforming existing plant into second-hand plant even though such plant is retained in service. Inefficiency may be the final factor imposing the limit to be assigned to the life of a unit under each one of the factors, "wear and tear," "obsolescence" and "inadequacy," but one of these three factors alone is instrumental in determining the life of a unit and, when that life has been determined and assigned definitely, and not until after that life has been exhausted, does the plant become second-hand.

121. Wear and tear of plant. As has been stated already in speaking of physical depreciation, the first and usually the most important factor tending to limit the life of a plant unit of an undertaking is that which arises simply from time of service, exposure to the elements and decay, and has been termed "wear and tear."

All elements and units in a plant begin to deteriorate with more or less rapidity from the moment they are introduced into the plant, even though, in many cases, the actual use of the units may not be great. Thus, poles, insulation of outside rubber-covered wire, switchboard plugs and cords all begin to deteriorate with more or less rapidity from the time they are put into place, and will continue to deteriorate until such time as the units are unable to meet the requirements of service and must be replaced.

Deterioration as here considered has no effect upon the service or utility furnished, as the plant is kept up to a standard of operating efficiency by the repair of individual units and by the time and money expended for the up-keep of the plant, usually termed the "maintenance and current repair" of the plant. But despite such maintenance and current repair, a time comes when either the expenses of this character become so great that, for engineering and commercial reasons, the unit of plant has to be replaced, or the unit becomes so weak as to render its retention a hazard to the service and makes its replacement desirable.

It must be clearly remembered that the above figures for the life of elements will be greatly affected by the condition in which they have been maintained by current repair. In consequence of this, the effects of wear and tear upon the elements, of which the plant is composed, cannot be determined by theoretical considerations but only by actual observation and inspection made by experts familiar with the operation of similar plants.

122. Obsolescence. The physical life of a unit of plant may be shortened by changes or improvements in the art, which development will be productive of a better product or of a similar product at a lower cost, or possibly of both.