Appendices: Costing Methods, Demand Forecasting & Revenue Modeling

A thorough examination of utility costs is an integral component of sound utility financial management and ratemaking, serving several purposes. Likewise, demand forecasting serves as a critical step in the planning, design and evaluation of an effective rate structure.

Building Better Water Rates for an Uncertain World provides appendices that present detailed information on the following topics to improve rate-making:

• Appendix A: Costing Methods provides technical background on water costing methods, including costing concepts, a comparison of average embedded cost of service to marginal/incremental cost of service, simple applications of marginal/incremental cost of service methods to water service, and an overview of two avoided cost models that rigorously estimate the forward looking incremental costs around the expansion paths of water and wastewater service, respectively.
• Appendix B: Demand Forecasting and Revenue Modeling  provides technical background on water demand modeling and water sales modeling, including various approaches, examples, and illustrations.