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Customer costs are those associated with serving customers regardless of the amount of water <br />used, i.e., meter reading, accounting, Uilling, etc. <br />The allocation of cost bctween Uase and extra capacity components depends upon the design and <br />use of tlie particular portion of the water system being analyzed. If an asset of the water system <br />is designed to meet only the average demand on the system - a raw water supply reservoir for <br />instance - the capital costs and operatioil and maintenance costs for that asset are totally allocated <br />to the base compoiient. If the assei is designed to provide additional capacity which is needed to <br />provide peak demand on the system, the capital and operating costs associated with the asset are <br />allocated to base and extra capacity components in the same proportion that the capacity of the <br />asset is used for average and peak use. The appropriate allocation factors between base and extra <br />capacity usually vary from system to system. Therefore, they should be deteimined fiom actual <br />operating history or design criteria of the system. <br />The other important consideration for setting equitaUle rates for utility service is the <br />estaUlishment of customer classes for cost distriUution after costs are allocated to service <br />fiinctions. A customer class should include only those customers who; (a) are in similar location <br />in relation to the utility, (b) use the same or similar facilities of the utility, (c) receive similar <br />service from the utility, and (d) place similar demands of the utility. It is important to note that <br />makeup of the customer class can change depending upon the particular asset that is being <br />allocated. A customer class that is appropriale for allocation of one type of cost, e.g., water <br />treatment costs, nlay include customers that would not Ue appropi7ate to the class when another <br />type of cost of assets is allocated, e.g., treated water distribution costs. The objective of cost <br />allocation and ultimate distribution to customer groups is to avoid cross-subsidization, and it is <br />important with that objective in view, differences in scrvice commitment and service <br />requirement be given full consideration in determining customer classes. <br />6 Citp of Pnris, Te.cas <br />II'ptermid WnstervnterCosrofSeiviceSiudt, <br />Jtrne 2010 <br />231 <br />