SCWC proposes to allocate the $2,699,500 revenue increase to all customer classes based on the cost function categories of energy (or commodity) and demand (or peak supply). Customer related costs, the third component of cost function, are not a factor in SCWC's cost allocation proposal. Under SCWC's proposal, annual O&M costs of $444,000 would be allocated on an equal-cents-per kWh basis, while capital-related costs of $2,255,500 would be allocated based on a December 2003 study of hourly load data. SCWC explains that the load data was compiled from 242 real-time load research meters attached to existing meters representing all customer classes. The system peak in the study occurred on December 28, 2003, at approximately 7:00 pm, when peak loads increased from a system load average of 20-27 MW to about 39 MW. Using the hourly load data, SCWC allocated capital-related costs based on the contribution of each customer class to the load swing that occurred between the peak hours and other hours. Large Power customers were excluded in the calculation, as these are all interruptible customers.7 However, SCWC explains that the Large Power customer class benefits from the new generation facility, and will experience fewer interruptions as a result of the new generation facility. Therefore, SCWC proposes that a rate increase equal to the overall system average increase be allocated to the Large Power class. SCWC's proposed capital-related cost revenue requirement allocations to various customer classes are shown below:
The total cost allocation of the entire revenue requirement is shown below:
Customer Class | O&M Costs8 |
Capital Related |
Total Costs |
Percent | ||
Commercial Small Commercial Medium Commercial Large Commercial |
$ 52,006 $ 38,038 $ 63,120 |
$ 122,210 $ 143,147 $ 121,173 |
$ 174,216 $ 181,185 $ 184,293 |
6.45% 6.71% 6.83% | ||
Residential Perm Residential Single Family Res Low Income Res Multi-Family Res Seasonal Residential Street Lighting |
$115,790 $ 21,924 $ 4,945 $ 84,660 $ 686 |
$ 424,668 $ 78,444 $ 17,925 $1,134,140 $ 1,999 |
$ 540,458 $ 100,368 $ 22,870$ 1,218,800 $ 2,685 |
20.02% 3.72% 0.85% 45.15% 0.10% | ||
Large Power |
$ 62,832 |
$ 211,793 |
$ 274,625 |
10.17% | ||
TOTAL |
$444,000 |
$2,255,500 |
$2,699,500 |
100.00% | ||
SCWC states that it also considered an alternative method for allocating the capital cost using a "levelized revenue requirement." This methodology would result in a constant revenue requirement during the life of the plant. The initial rate increase would be smaller with the levelized approach compared to the traditional method; however, in later years the levelized revenue requirement would exceed the traditional revenue requirement. SCWC explains that it rejected a levelized revenue requirement method as SCWC auditors informed the company that it would be required to write-off any difference between revenues calculated with the levelized approach and revenues calculated using the traditional revenue requirement model.
7 SCWC notes that the Large Power customers (ski areas and the local water treatment facility) operate their own generation. 8 Based on kWh usage.