The service area of most consumer- or publicly-owned utilities is located in a single state, but there are always exceptions. One such exception is a utility that serves retail customers within two states with interconnected transmission and distribution lines and also serves an industrial project from a separate transmission and distributions system. A cost of service and rate design study for this utility required a cost allocation of test-year actual and test-year adjusted revenues and expenses between the retail system and the project system. From the cost separation process, GUERNSEY developed the revenue requirement for the retail system. The project revenue requirement was established by contract, so the total utility revenue requirement was the retail plus project revenue requirement.
The retail rates were the same in both states, but the cost of service must have two classes for each rate schedule for the state separation. The cost allocation reports were prepared for the rate classes by state, total rate classes, and state totals. These cost allocation separations were the foundation for the individual state revenue requirements.
The revenue requirement was subject to a state regulatory commission in one state and there was a process for customer appeal to the state regulatory commission in the other state.
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