The Value of Water Utilities: Replacement Cost Versus Market Value

Key Takeaways The reproduction or replacement cost estimate of a new water utility less its physical depreciation (RCNLD) is used for a variety of purposes, including estimating the value of a utility and for municipal utility rate‐setting. Utilities are likely to include condition‐based depreciation in an RCNLD estimate but not other forms of depreciation. Fair market value isn't clearly represented if economic obsolescence isn't part of an RCNLD estimate.