In general, the rate base consists of the value of property as used by the utility in providing service.
The rate base can include: cash, working capital, materials and supplies, deductions for accumulated provisions for depreciation, contributions in aid of construction, customer advances for construction, accumulated deferred income taxes, and accumulated deferred investment tax credits, all dependent on the method that is used in the calculation.
[1] An emerging question facing utility regulators in some states is whether cloud computing software should be included in rate bases.
In either case, depreciation on plant and equipment is subtracted from the rate base and carried as an operating expense.
The theory behind including depreciation as an expense is that capital may be accumulated for further expansion and growth.