the machinery forming the
generating plant itself. As the business increases from, year to year,
the item of interest per unit of maximum output consequently will
constantly decrease, owing to the fact that each additional unit of
output following an increase of connected load increases the divisor
by which the total interest is divided. The result is from year to
year the interest cost of each additional unit of maximum output is a
constantly reducing amount, and consequently the average interest cost
of each unit of maximum output should, in a well regulated plant, grow
less from year to year until the minimum interest cost per unit is
reached. This minimum interest cost is reached when the capacity of
the whole system and the total units of output at maximum load are
identical, although of course it will always be necessary to have a
certain margin of capacity over possible output, as a factor of
safety.
This same rule, although to a less extent, applies to the operating
and general expense cost, that is, the cost other than interest. To
particularize, the manager's salary and other administrative expenses
do not increase in proportion to maximum output of station; therefore,
the cost of administration per unit of output, if the business is in a
healthy condition, must be from year to year reduced. There are a
great many other expenses that are not directly in proportion to
output, and these follow the same rule. In a well-run plant the
percentage of operating expenses to gross receipts will stand even
year after year, while the income per unit of output will be
constantly reduced. This is an excellent evidence of the fact that the
cost per unit of output is constantly being reduced, as, if it were
not, the percentage of expenses to gross receipts would be increased
in direct proportion to the reduction in price. Moreover, it should be
borne in mind that there are many difficulties in the way of universal
use of electric energy from a central station system. It is the rare
exception to find a house not piped for gas and water. In the case of
the latter it is almost invariably the rule that owners are compelled
to pipe for water, under the sanitary code of the municipality. On the
other hand, in a large residential district, it is the exception to
find a house wired for electric light; consequently the output of
current per foot of conductor is at the present time very low as
compared with the output of gas per foo
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