12-cost-of-service-manual

12-cost-of-service-manual - Cost-of-Service Rates Manual...

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Cost-of-Service Rates Manual Federal Energy Regulatory Commission 888 North Capitol Street, N.E. Washington, D.C. 20426 United States of America www.ferc.gov June 1999
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Table of Contents Introduction. ..................................................................................................................................... 1 Step 1: Computing the Cost-of-Service. ......................................................................................... 6 The Cost-of-Service Formula. ............................................................................................. 6 Test Period. .......................................................................................................................... 7 Rate Base. ............................................................................................................................ 8 Gross Plant. .............................................................................................................. 9 Allowance For Funds Used During Construction (AFUDC). ..................... 9 Accumulated Reserve for Depreciation. ................................................................ 10 Management Fee. ....................................................................................... 10 Accumulated Deferred Income Taxes (ADIT). ..................................................... 11 Working Capital. .................................................................................................... 12 Cash working capital. ................................................................................. 12 Materials and Supplies, and Prepayments. ................................................ 13 Cost-of-Service. ................................................................................................................. 13 Return 13 Capitalization or Capital Structure. ............................................................ 15 Cost of Debt. .............................................................................................. 16 Return on Equity. ....................................................................................... 16 Pretax Return. ............................................................................................ 17 Operation and Maintenance Expenses. .................................................................. 18 Administrative and General Expenses. .................................................................. 19 Depreciation Expense. ........................................................................................... 19 Federal and State Income Taxes. ........................................................................... 20 AFUDC . .................................................................................................... 21 Effective Tax Rate . ................................................................................... 22 Limited Liability Companies. .................................................................... 22 Non-Income Taxes. ................................................................................................ 22 Credits to the Cost-of-Service. ............................................................................... 23 Step 2: Computing a Functionalized Cost-of-Service. ................................................................. 23 K-N Method. ...................................................................................................................... 24 Step 3: Cost Classification. ........................................................................................................... 28 Classification of Costs Between Fixed and Variable. ........................................................ 28 Classification of Costs Between Demand and Commodity. .............................................. 29 Volumetric . ........................................................................................................... 30 Fixed-Variable. ...................................................................................................... 30 Seaboard . ............................................................................................................... 30 United 31 Modified Fixed-Variable. ...................................................................................... 32 Straight Fixed-Variable. ......................................................................................... 32 Step 4: Cost Allocation. ................................................................................................................ 33 Mcf's and Dth's. .................................................................................................................. 34 Allocation Factors and Billing Determinants. ................................................................... 34 Load Factor. ....................................................................................................................... 35 Allocation of Costs Between Jurisdictional and Non-jurisdictional Services. .................. 36 Allocation of Costs Among Zones. .................................................................................... 36
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Allocation of Costs Among Jurisdictional Services. ......................................................... 37 Step 5: Rate Design. ...................................................................................................................... 39 Firm Service Rates. ............................................................................................................ 39 Interruptible Service Rates. ................................................................................................ 39 Interruptible Rate Computed as Derivative of Firm Rate. ..................................... 40 Revenue Check. ................................................................................................................. 42 Rate Design and Load Factors. .......................................................................................... 43 Small Customer Rates. ....................................................................................................... 43 Discounting and Discount Adjustments. ........................................................................................ 44 Revenue Crediting Method. ............................................................................................... 45 Proportional/Fractional Method. ........................................................................................ 46 Iterative Method. ................................................................................................................ 47 Distance Based Rates. .................................................................................................................... 50 Mileage Based Rates. ......................................................................................................... 51 Zoned Rates. ...................................................................................................................... 51 Mileage Costs. .................................................................................................................... 51 Non-mileage Costs. ............................................................................................................ 51 Calculation of Zoned Rates for Pipeline U.S.A. ................................................................ 53 Calculation of Dth-Miles. .................................................................................................. 54 Storage Services and Rates. ........................................................................................................... 56 Classification of Storage Costs. ......................................................................................... 57 Allocation of Storage Costs. .............................................................................................. 57 Design of Firm Contract Storage Rates. ............................................................................ 57 Design of Interruptible Contract Storage Rates. ................................................................ 58 Appendices A-1 …................................................................................................................................. 63 A-2 …................................................................................................................................. 64 A-3 …................................................................................................................................. 65 A-4 …................................................................................................................................. 66 A-5 …................................................................................................................................. 67 A-6 …................................................................................................................................. 68 A-7 …................................................................................................................................. 69 A-8 …................................................................................................................................. 70 A-9 …................................................................................................................................. 71 A-10 …............................................................................................................................... 72 A-11 …............................................................................................................................... 73 A-12 …............................................................................................................................... 74 A-13 …............................................................................................................................... 75 A-14 …............................................................................................................................... 76 A-15 …............................................................................................................................... 77 A-16 …............................................................................................................................... 78 A-17 …............................................................................................................................... 79 A-18 …............................................................................................................................... 80 A-19 …............................................................................................................................... 81 A-20 …............................................................................................................................... 82
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A-21 …............................................................................................................................... 83 A-22 …............................................................................................................................... 84 A-23 …............................................................................................................................... 85 A-24 …............................................................................................................................... 86 A-25 …............................................................................................................................... 87 A-26 …............................................................................................................................... 88 A-27 …............................................................................................................................... 89 A-28 …............................................................................................................................... 90 A-29 …............................................................................................................................... 91 A-30 …............................................................................................................................... 92 A-31 …............................................................................................................................... 93 A-32 …............................................................................................................................... 94 A-33 …............................................................................................................................... 95 A-34 …............................................................................................................................... 96 A-35 …............................................................................................................................... 97 A-36 …............................................................................................................................... 98 A-37 …............................................................................................................................... 99 A-38 …............................................................................................................................. 100 A-39 …............................................................................................................................. 101 A-40 …............................................................................................................................. 102
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Cost-of-Service Rates - An Introduction 1 Introduction The Natural Gas Act (NGA) requires that rates charged for interstate pipeline services be "just and reasonable." Setting just and reasonable rates requires a balancing of equities between the interests of the pipeline and its ratepayers. The basic methodology we use to establish just and reasonable rates is cost-of-service ratemaking. Under cost-of-service ratemaking, rates
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This note was uploaded on 03/31/2012 for the course TAX 4001 taught by Professor Robertmcgee during the Spring '09 term at FIU.

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12-cost-of-service-manual - Cost-of-Service Rates Manual...

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