The allowed rate of return is set by the regulatory authority in the determination of a utility’s cost of service; it is set prospectively and there is no guarantee that the utility will actually earn this …

For ratemaking purposes, the income statement summarizes: (1) the funds collected by the utility from its customers; (2) the company’s spending and its use of resources in providing service to …

Rate Design – how the revenue be collected from the various classes (residential, commercial, industrial) and based upon cost-of-service (i.e. the charge levied against a customer is …

Incidentally, throughout the history of public utility regulation, stakeholders have petitioned commissions to revisit old rate mechanisms and consider new ones (e.g., late 1960s and early …

As defined in this paper, an FRP is: A ratemaking method in which the utility adjusts its base rates outside of a general rate case, usually annually, based on an actual or projected rate of return …

Cost of Service study is developed to allocate the utility’s revenue requirement to various customer classes (e.g., residential, commercial, industrial) Rates are designed, based on the …

The Cost of Capital is measured as a percentage and it is multiplied by the dollar amount of rate base to determine the amount of dollars a utility has to collect in its revenue requirement to …

` The total dollar amount of return, or earnings, is calculated by multiplying the allowed rate of return by the utility’s total dollar amount of rate base ` The Allowed Rate of Return can be …

These three outcomes have characterized good ratemaking going back to the beginning of public utility regulation. Economic efficiency requires utilities to create or adopt new technologies, …

The utility is allowed, through its rates, to collect a percentage of profit or margin on the value of its rate base. This percentage of profit or margin (called rate of return) varies, but generally …