AWWA ACE92003

This is one of five papers from a seminar about rate making for water wholesalers. The purpose of the seminar is present the principal factors that one should consider in developing charges for wholesale service and to discuss and illustrate those factors in some detail. Thus, the seminar as a whole serves as an overview of the topic. This paper, the second in the series, offers a detailed discussion of the rate base, that is, the investment base for which the wholesale customers are responsible and upon which the supplier should recover depreciation and return. Rates must be based on total cost of service that must be recovered, or identified revenue requirements. Such costs usually include both operating and capital costs. Revenue requirements may be established using one of two approaches, the cash needs or the utility approach. Once the revenue requirements are identified, the costs are usually allocated to classes of customers for whom the costs of providing service vary. The allocation procedure could involve use of several methods, including the base-extra capacity method, or, in some cases, the commodity demand approach. Regardless of the allocation method used, it is necessary to decide which of the total costs are to be assigned to wholesale customers. Considerations in allocating costs to wholesale customers include legal and nondiscriminatory requirements, wholly or partially dedicated facilities, and demands on the system both now and in the future. The inclusion of costs for used and useful capacity is discussed.

Product Details

Published:

01/01/1992

ISBN(s):

0898676495

Number of Pages:

9

File Size:

1 file , 350 KB