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In a Time of Transition, Regulators Can Drive Cutting-Edge Cost Allocation Reform

The need for change in how we measure the cost of providing electric service by customer class is obvious to any attentive observer of the dramatic changes now underway in the electric utility industry. Electric Cost Allocation for a New Era, the manual RAP published at the beginning of 2020, provides detailed guidance on the…

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Modern Marginal Cost of Service Studies

The previous blog post in this series examined embedded cost of service studies — but some states choose to look ahead, considering marginal costs. This approach stems from the economic theory that today’s consumption drives tomorrow’s costs and customer classes should be responsible for the future impact of their usage. These states, notably California, Oregon…

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Updating Embedded Cost of Service Studies for a New Era

In the first blog post in this series, we outlined how our new manual, Electric Cost Allocation for a New Era, looks comprehensively at the process of dividing utility costs among customer classes — and proposes several ways it should be updated to account for modern features of the power system. In this second installment,…

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Cost Allocation: New Approaches for a New Era

Setting electric utility rates has traditionally been a three-step process: first, determining the revenue requirement; second, determining how to equitably divide costs among classes of ratepayers; and third, designing the rates themselves. That second step, cost allocation, is a process that has been around for decades, and many jurisdictions have created detailed precedents for how…