(1) The purpose of these rules is to establish minimum filing requirements for any cost of service study filed with the commission. These rules are designed to streamline, improve, and promote efficiency in analyzing rate cases, clarity of presentation, and ease of understanding. The minimum filing requirements will allow for comparisons of cost of service studies.

(2) The cost of service study is one factor among many the commission considers when determining rate spread and rate design. The commission may also consider, as appropriate, such factors as fairness, perceptions of equity, economic conditions in the service territory, gradualism, and rate stability.

The rules in this chapter apply to any person or party who files a cost of service study in any proceeding before the commission.

(1) "Allocation factor" means a mathematical expression of the specific cost relationship among revenue requirement and customer classes.

(2) "Common function" means costs that can be functionalized to both electric and natural gas operations.

(3) "Cost of service study" means a study that identifies and calculates, using regulatory accounting rules and principles, the extent to which customers in various customer classes cause costs to a utility. This study correlates a utility's costs and revenues with the service provided to customers in each customer class.

(4) "Electric distribution system peak" means the maximum load of the Washington portion of a utility's distribution system within an identified time frame.

(5) "Load study" means a statistical analysis of load data collected from sampled customers to estimate the load profiles of customer classes over a minimum twelve-month period. Load profile estimates of customer classes shall be hourly (or subhourly) for electric, and daily for natural gas. A load forecast or load projection model is not a substitute for a load study.

(6) "Parity ratio" means a customer class's revenue-to-cost ratio divided by the system's revenue-to-cost ratio. This ratio shall only be presented to the commission as either a percentage or a decimal.

(7) "Revenue-to-cost ratio" means revenue at current rates divided by the revenue requirement. This ratio shall only be presented to the commission as either a percentage or a decimal.

(8) "Special contract" means a negotiated service agreement between a utility and a customer approved pursuant to WAC 480-80-143.

(1) All cost of service study results must be filed in the following forms, available from the commission: Electric cost of service template; and, gas cost of service template. In addition, the following must be provided contemporaneously with all cost of service studies:

(a) Supporting testimony. All cost of service studies must be filed with supporting testimony and exhibits. If supporting testimony or exhibits reference, discuss, or specifically rely on data, models, calculations, or associated information found only in the supporting work papers, the supporting testimony or exhibit must cite to the work papers.

(b) Supporting work papers. In addition to complying with WAC 480-07-140 (6)(a)(ii), all supporting models, calculations, data, and associated information must be provided to the parties in a manner that allows for the verification and modification of all of the model's inputs and assumptions. This includes:

(i) All models must be fully functional, which requires, at a minimum, that cells are linked where possible and all formulas are calculable. Wherever practical, all associated calculations necessary to support the results of the study must be consolidated in the same electronic workbook file.

(ii) Any macros in a model must be explained in a narrative. The narrative must also identify where each macro is found in the model.

(iii) Each electronic cost of service workbook must have an index identifying links to any external spreadsheet.

(2) Companies that provide electric and natural gas service must file a cost of service study for their electric and natural gas operations. If a company providing electric and natural gas service files a general rate case for only one of its services, the company must apportion the common costs shared by both services in lieu of filing a cost of service study for the service not included in the general rate case.

(1) The rate schedule usage data for any cost of service study must come from the best available source: Advanced metering technology, including advanced metering infrastructure (AMI) and advanced meter reading (AMR); or, a load study.

(a) For utilities with AMI, the use of data from a load study must be explicitly justified.

(b) For utilities with AMR, data from AMR may be used if granularity of the data meets or exceeds hourly for electric and daily for natural gas. For utilities with AMR with the data granularity required by this subsection, the use of data from a load study must be explicitly justified.

(c) For utilities with other advanced metering technology, data from that metering technology may be used if granularity of the data meets or exceeds hourly for electric and daily for natural gas. For utilities with other advanced metering technology with the data granularity required by this subsection, the use of data from a load study must be explicitly justified.

(d) For utilities that do not have advanced metering technology described in subsection (1), (2), or (3) of this section, a load study must be used. Data from special contracts may be used in a load study.

(e) Street lighting schedules may be estimated and, if so, the estimation method must be explicitly presented in testimony and exhibits.

(2) Rate schedule usage data for any cost of service study must not be older than five years.

(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

Table 2

Electric Cost of Service Approved Classification and Allocation Methodologies

Table 3

Natural Gas Cost of Service Approved Functionalization Methodologies

Table 4

Natural Gas Cost of Service Approved Classification and Allocation Methodologies

The commission may grant an exemption from the provisions of any rule in this chapter in the same manner and consistent with the standards and according to the procedures set forth in WAC 480-07-110 (exceptions from and modifications to the rules in this chapter; special rules).