What does Commission staff review during their review of a company’s rate increase proposal?
Commission staff looks at five main issues: 1. Actual historical cost to provided service based on 12 months of financial information, excluding items for which money cannot be recovered from customers (e.g., political contributions and fines levied); 2. The company’s total investment in equipment used to provide service (called rate base); 3. The appropriate profit level (called rate of return) the company should be allowed for its investments; 4. The appropriate amount that each customer class (residential, commercial or industrial customers) should pay (residential, commercial or industrial customers). 5. The rate design. Monthly rates are either flat-rated service (unlimited water usage) or metered service (customers pay for what they use). Metered rates include a base charge, which may or may not include an amount of water, and usage blocks. The number and rate spread of the usage blocks will affect customer behavior and revenue to the company.
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- What does Commission staff review during their review of a company’s rate increase proposal?
