What is Cost-of-Service?The second step to making great utility rates is to figure out who needs to pay, and how much. The cost-of-service analysis gives you the information you need to charge the right amounts to the right people based on the way each type of customer uses your water or wastewater system. Cost-of-service is your foundation for both explainability and defensibility of your rates.
Water SystemsIn water systems, different types of customers use the water system’s capacity in different ways. Because the water system is constructed to meet all types of demands, it is important to determine how much it costs and who is using services on average, on peak-day, on the peak-hour, and for fire protection. The water system cost-of-service analysis assigns these costs based on the measured demands of each type of customer.
Wastewater SystemsThe key cost drivers for wastewater systems are sewer flows and their related strength loadings. Strength loadings measure pollutant levels for things like organics, solids, and nutrients – things that the wastewater treatment process is meant to remove before the cleaned water is sent back to the waterways. Different types of customers contribute different levels of flow and loadings. The cost-of-service analysis isolates these cost differences allowing you to charge customers accordingly.
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