Following on from the post about the 'fifth T' of CosTs, and trying to work through a Business Plan for a utility, it strikes me that it could be useful to 'rename' the accounting charge of Depreciation as 'the sustainability charge'? The engineers I often work with cannot always see the benefit or purpose of depreciation so we try to explain it as the measure of using up the value of fixed assets .... which only goes so far as an explanation. I then try explaining it as the means of self-funding Capital Maintenance Expenditure which leads on to another set of challenges. But perhaps if we suggest that tariffs, to be cost-reflective, have to include Operating Expenditure plus 'Sustainability Expenditure' (that is Depreciation or an equivalent amount from an updated Asset Management Plan where Fixed Assets have not been revalued appropriately) plus the Cost of Capital (OK, have to work on that last one) then it might make more sense?
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