(1) A cost of service study filed with the commission must be calculated using an embedded cost method.
(a) Electric studies shall use the FERC accounts outlined in Table 1 in subsection (3) of this section to functionalize the cost of service. Costs shall be directly functionalized where information is available. Functionalized costs will be classified and allocated by the methods outlined in Table 2 in subsection (3) of this section.
(b) Natural gas studies shall use the FERC accounts outlined in Table 3 in subsection (3) of this section to functionalize the cost of service. Costs shall be directly functionalized where information is available. Functionalized costs will be classified and allocated by the methods outlined in Table 4 in subsection (3) of this section.
(c) FERC accounts not included in Table 1 or Table 3 in subsection (3) of this section but identified in a cost of service study must be accompanied by a rationale for the functional method chosen in the supporting testimony.
(d) If an allocation method in Table 2 or Table 4 in subsection (3) of this section requires direct assignment, any similar remaining costs in the account may not be allocated to the classes included in the direct assignment; except in circumstances where that class derives a direct benefit from the nondirect assigned costs. If a particular account contains several cost items, of which only certain items in the FERC account are directly assigned, the cost items that are not directly assigned will be allocated as appropriate.
(e) The abbreviations for the functionalized costs are:
"Comm" is an abbreviation meaning the common function;
"Cust" is an abbreviation meaning the customer function;
"Dist" is an abbreviation meaning the distribution function;
"Gen" is an abbreviation meaning the generation function, for electric;
"Prod" is an abbreviation meaning the production function, for natural gas;
"Stor" is an abbreviation meaning the storage function, for natural gas; and
"Tran" is an abbreviation meaning the transmission function.
(2) In addition to filing a cost of service study as required in subsection (1) of this section, a party may file a cost of service study based on a system-wide econometric study, a system-wide marginal cost study, or an embedded cost of service study with modifications to the methodologies outlined in Tables 1 through 4 in subsection (3) of this section provided that each modification is explained in narrative testimony and the party shows that each modification materially improves the cost of service study and is in the public interest.
(3) Tables 1 through 4 of this subsection outline the functionalization, classification, and allocation methods required by subsection (1) of this section.
Table 1
Electric Cost of Service Approved Functionalization Methodologies
Functionalization | FERC Account Numbers |
Generation | 151, 152, 310-317, 330-337, 340-348, 500-515, 535-545.1, 546-557 |
Transmission | 350-359.1, 560-573 |
Distribution | 252, 360-374, 580-598 |
Customer | 235, 901-905, 907, 908* 909-910 |
Common | 920-935, working capital allowance |
Gen/Tran/Dist/Cust/Comm | 301-303, 403, 403.1, 404-407 |
Gen/Tran/Dist/Comm | 105, 107, 108, 111, 154, 165, 281, 282, 389-398 |
Allocate based on subaccount | 182.3, 253, 254 |
*Expenses included in account 908 that are related to conservation must be functionalized as generation related. |
Table 2
Electric Cost of Service Approved Classification and Allocation Methodologies
Functionalized Cost | Classification Method | Allocation Method |
Generation | Renewable future peak credit with net power costs allocated on energy | Load net of renewable generation, using 12 coincident peaks. Net power costs are allocated using annual energy usage at the point of generation. |
Transmission | Demand | 12 coincident peaks. |
Distribution Substation | Demand | Direct assignment to large customer classes based on load ratio share of substations they are fed from; for this allocator only, the utility may determine "large customer." |
| | All other classes use an average of the relative share of the summer distribution system coincident peak and the relative share of the winter distribution system coincident peak. |
Distribution Line Transformers | Demand | Secondary customers directly assigned where practical. All remaining costs are allocated using a relative ratio of transformers at current installation costs. |
| | Allocation to the lighting class(es) may be based upon its proportion of noncoincident peak to the sum of noncoincident peaks for all secondary voltage customers. |
Distribution Poles and Wires | Demand | Primary system customers are allocated using the same method as distribution substation, where practical. When not practical, allocate using 12 distribution system noncoincident peaks. |
| | Secondary system customers are allocated using 12 distribution system noncoincident peaks. |
Service Lines | Customer | Average installed cost for new service lines multiplied by customer count relative to total installed cost. |
Meters | Customer | Average installed cost for new metering multiplied by customer or meter count. |
Customer Service/Billing | Customer | All costs assigned by weighted customer counts. |
Administrative & General and General Plant | Depends on functionalization of account | Property insurance and property taxes based on allocated plant; pensions and employee insurance based on salary and wages; FERC fees based on energy; revenue-based fees allocated by class relative share of total revenue. |
| | The remainder of administrative & general and general plant costs shall be allocated as deemed appropriate. An explanation of the allocation method used must be included in testimony. |
Intangible Plant | Depends on functionalization of account | Each type of intangible and amortization in a separate account, allocated using appropriate factors. A materiality threshold of 0.5% of intangible plant will be applied. |
Table 3
Natural Gas Cost of Service Approved Functionalization Methodologies
Functionalization | FERC Account Numbers |
Production | 800-813 |
Storage | 350-356, 352.1, 352.2, 352.3, 814-826, 830-837, 840-843, 842.1-842.3, 843.1-843.9 |
Transmission | 365.1, 365.2, 366-371, 850-867, 870 |
Distribution | 374-387, 871-881, 885-894 |
Customer | 901-905, 907, 908*, 909-910 |
Common | 920-935, working capital |
Prod/Tran/Dist/Stor/Comm | 101.1, 104-108, 111, 114, 115, 117.1-117.4, 165, 182.3, 186, 190, 228.1-228.4, 229, 235, 252, 253, 255, 281-283, 301-303, 389-398, 403 |
Allocate based on subaccount | 182.3, 254 |
*Expenses included in account 908 that are related to conservation must be functionalized as production related. |
Table 4
Natural Gas Cost of Service Approved Classification and Allocation Methodologies
Functionalized Cost | Classification Method | Allocation Method |
Distribution Mains | Demand | Direct assignment of distribution mains to a single customer class where practical. All other costs assigned based on design day (peak) and annual throughput (average) based on system load factor. |
Transmission Main | Follows distribution mains | Follows distribution mains. |
Distribution Assets | Follows distribution mains | Follows distribution mains. |
Storage | Determined on a case-by-case basis | Costs classified as balancing are allocated to all customers based on winter sales. |
| | All remaining costs are allocated to sales customers with a ratio based on average winter sales that exceed average summer sales. |
Services | Customer | Allocated to customer class based on the class average service installation cost. |
| | Large customers are directly assigned based on a special study; for only this allocator, it is up to the utility to determine "large customer." |
Meters | Customer | Average installed cost for new metering multiplied by customer or meter count. |
Customer Service/Billing | Customer | All costs assigned by weighted customer counts. |
Administrative & General and General Plant | Depends on functionalization of account | Property insurance and property taxes based on allocated plant; pensions and employee insurance based on salary and wages; FERC fees based on energy; revenue-based fees allocated by class relative share of total revenue. |
| | The remainder of administrative & general and general plant costs shall be allocated as deemed appropriate. An explanation of the allocation method used must be included in testimony. |
Intangible Plant | Depends on functionalization of account | Each type of intangible and amortization in a separate account, allocated using appropriate factors. A materiality threshold of 0.5% of intangible plant will be applied. |
